Since 2020, the COVID-19 pandemic has prompted a significant shift in work arrangements, with many employees across Australia adapting to working from home. As a result, the Australian Taxation Office (ATO) has made changes to the work from home deductions that are available to employees. These changes, which are set to come into effect from March 1, 2023, aim to provide more clarity and flexibility for employees who continue to work from home.
Assistant ATO Commissioner Tim Loh explained that taxpayers can choose one of two methods to claim working from home deductions: either the “actual cost” or “fixed rate” method. Only the fixed rate method is changing.
The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022–23 income tax returns.
Are you eligible to claim work from home deductions?
The first thing to consider before claiming deductions for working from home is that you are actually eligible to do so. Loh explains, “To claim your working from home expenses, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls. Also, you must incur additional expenses as a result of working from home.’
The new fixed rate method
The revised fixed rate method can be used from the 2022–23 income year onwards. The changes are:
The cents per work hour has increased from 52 cents to 67 cents.
What’s covered by the rate
The revised fixed rate of 67 cents per work hour covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed if you use this method.
With this new rate comes stricter rules surrounding records kept for hours worked at home. Previously, the ATO accepted a record that represented the total hours worked from home, such as a four week diary.
From March 1, 2023, this no longer applies. “Estimates and four week representative diary’s will no longer be accepted.” Those working from home will need keep a record of the total number of hours they work from home across the entire financial year.
Another key change is that you now no longer need to have a dedicated home office in order to use this method.
Actual cost method
The actual cost method hasn’t changed. Taxpayers can claim the actual work-related portion of all running expenses.
This includes keeping detailed records for all the working from home expenses being claimed, including:
- all receipts, bills and other similar documents to show taxpayers have incurred the expenses, a record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4-week period to show the usual pattern of working at home).
- a record of how taxpayers have calculated the work-related and private portion of their expenses (for example, a diary or similar document kept for a representative 4-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop).
What you cannot claim
It’s important to note that the ATO has strict guidelines around what expenses can be claimed as work from home expenses. For example, personal expenses such as food and drink cannot be claimed, even if these items are provided to you in the office by your employer. Additionally, employees cannot claim expenses that have been reimbursed by their employer or that have been paid for using a salary sacrifice arrangement.