Working From Home - New ATO Tax Guidance

The ATO has recently released a tax guidance (PCG 2023/1) for claiming tax deductions for working from home.

You need to be aware of these changes so that you can keep the appropriate records to maximise your tax claims in your 2023 Tax Return.

WHAT ARE THE KEY CHANGES?

From 1 July 2022, the ATO has explained that taxpayers who are working from home can claim deductions based on:

• actual expenses, or
• revised fix rate method of 67 cents per hour.

A key change is that you do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the fixed rate method.

Also, if more than one individual is working from home at the same time, each individual will be able to apply the fixed rate method if they each meet the requirements listed above.

To be eligible to claim tax deductions for working from home expenses, you must:

• incur additional running expenses as a result of working from home
• be working from home to fulfil your employment duties, not just completing minimal tasks
• keep records at the time you work to prove you incur the cost.

Revised Fixed Rate Method

The revised fix rate method:

• has increased from 52 cents to 67 cents per hour worked from home
• removes the requirement to have a dedicated home office space
• includes claims for:
  • data and internet
  • mobile and home phone usage
  • electricity and gas
  • computer consumables (e.g. printer ink)
  • stationery
• allows taxpayers to separately claim the work-related portion of:
  • immediate deduction for items that cost less than $300 (e.g. keyboards, computer mouses, power boards, desk lamps and chargers)
  • depreciation of office furniture and computers (items that cost more than $300)
  • repairs and maintenance of these assets
  • cleaning (only if you have a dedicated home office)

Actual Cost Method

The actual cost method allows you to claim a tax deduction for the actual expenses you incur as a result of working from home.

Using this method, you are required to keep an invoice/receipt for every expense you claim.

Expenses You Can’t Claim

The ATO has stated that you can’t claim a tax deduction for:

• coffee, tea, milk and other general household items, even if your employer may provide these at work
• costs that relate to your children's education, such as equipment you buy – for example, iPads and desks, subscriptions for online learning
• items your employer provides – for example, a laptop or a mobile phone
• expenses where your employer reimburses you for the cost.

VERY IMPORTANT: THE RECORDS YOU NEED TO KEEP FOR THE FIXED RATE METHOD

You need to keep the following records to prove your fixed rate method working from home tax deductions for the 2023 financial year:

• A record which is representative of the total number of hours you worked from home during the period from 1 July 2022 to 28 February 2023; and
• A record of the total number of actual hours you worked from home for the period 1 March 2023 to 30 June 2023

To claim your working from home deduction using this method, you must keep:

• a record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document.
• at least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses.

If you haven't been keeping a record of the actual hours you worked from home, for the 2023 income year only, you must be able to provide both:

• a representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023 – for example, any kind of record of the hours you worked from home for a particular period that you can apply to the whole 8 month period.
• a record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023. We recommend keeping a daily timesheet to prove these working from home hours in the event of an ATO audit.

NEXT STEPS

To use the revised fixed rate method and claim 67 cents per hour for working from home expenses in your upcoming 2023 Tax Return, you will need to IMMEDIATELY start to keep a record of your actual hours working from home.

A record of your hours for the income year can be in the form of:

• timesheets
• rosters
• a diary or similar document kept contemporaneously.

You must also keep evidence for each of the additional running expenses that you incurred. The documents you need to keep in order to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense.

For energy, mobile and/or home telephone and internet expenses, you must keep one monthly or quarterly bill. If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses; for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others.

For stationery and computer consumables, which are occasional expenses, you must keep one receipt for each item purchased.

Please feel free to contact our office and speak with one of our accountants if you need any assistance with this so we can help you to maximise your tax deductions in your 2023 and future year Tax Returns.