The ATO has made changes to the way workers can claim working from home deductions to reflect work from home arrangements many of us now enjoy.

Don’t wait till tax time to pay attention to the changes.  The new record-keeping requirements start from 1 March 2023.

Here’s what you need to know.

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Each year, 8.5 million Australians claim around $20 billion worth of work-related expenses, many of which relate to working from home. The average claim each year is about $3,000.

From 1 March 2023 onwards, taxpayers will need to record the total number of hours they work from home.

Yes, you read this right: taxpayers have to record every hour they work from home.

You can choose one of two methods to claim working from home deductions:

1.     Actual cost

2.     Fixed rate

Only the fixed rate method is changing.

Fixed Rate Method

The revised fixed rate method applies for the2022–23 income tax returns ie. THIS tax year.

A fixed hourly rate of 67 cents is what you can claim as a total deductible expense for electricity and gas, phone usage (mobile and home), internet, stationery and computer consumables.

ie. if you work from home 2 days per week from 9am –5pm, your claim would look like this:

7 hours (taking an hr for lunch) X $0.67 = $4.69 perday;

or $9.38 per week for your 2 days a week.

Over a year (assuming a 48 week year), this looks like: $450 total.

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Seems a bit low to me!

And there was no explanation for how the ATO arrived at a rate of $0.67.

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One benefit is that you no longer need a dedicated home office to use the fixed rate method.

Items that still can be claimed separately and additionally include:

·      decline in value of assets used while working from home, such as computers and office furniture,

·      repairs and maintenance of these assets and

·      costs associated with cleaning a dedicated home office.

Record keeping

• Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document under this method from 1 March 2023.
• Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing     employer or business systems, or a diary for the full year.
• Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and     electricity when working from home, they must keep one bill for each of these expenses).

Actual cost method

There’s no changes here, however it does require more detailed paperwork and calculations.

To use the actual cost method to claim actual expenses, you must:

• incur additional running expenses as a result of working from home
• keep records or other written evidence, which shows the amount:    

 
1. you spend on expenses
 
2. you spend on depreciating assets you buy and use while working from home
 
3. of work-related use for your expenses and depreciating assets (those that lose value due to wear-and-tear).

You can’t claim running expenses if other people living in your house (who are not working from home) are in the same room as you while you are working from home.

How it works

Using the actual costs method, you work out your deduction by calculating the actual additional expenses you incur when working from home. This includes expenses you incur for:

• the decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
• electricity & gas (energy expenses) for heating, cooling & lighting
• home and mobile phone, data and internet expenses
• stationery and computer consumables, such as printer ink and paper
• cleaning your dedicated home office.

Where you incur running expenses for both private and work purposes, you need to apportion your deduction. You can only claim the work-related portion as a deduction.

The ATO has a helpful calculator to assist you workout what your claimable work from home expenses are.  You can find it here (or search ATO home deductions calculator) if the link breaks:

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=HomeOfficeSimplified&anchor=HomeOfficeSimplified/questions&anchor=HomeOfficeSimplified/questions#HomeOfficeSimplified/questions

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Source: ATO website

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So, I highly recommend you be proactive with your record keeping on working from home days so tax time is easier for you.

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