The ATO has announced revised working from home deduction rules for taxpayers, changing the start date to 1 March 2023 and a fixed-rate deduction of 67c an hour for work from home claims. The finalised guidance follows on from the July 2022 abandonment of the 80c per hour pandemic shortcut method, reducing the options to either the revised fixed rate method or the actual costs method.
The ATO says the changes better reflect contemporary working from home arrangements. Assistant 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 latter is changing. The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are calculating deductions for their 2022–23 income tax returns.
The ATO will accept a representative record of hours worked from home for the period 1 July 2022 to 28 February 2023, but after that “taxpayers will need to record the total number of hours they work from home”. It is important to note the revised rate relates only to the claiming of additional running expenses incurred as a result of working from home e.g. electricity, depreciation, internet and phone.
From 1 July 2022, the 80 cents per hour shortcut method is no longer available. If a taxpayer is unable to use the revised fixed-rate method, they will need to use their actual expenses to claim a deduction.
Important points to note:
- Taxpayers who work from home must record every hour they work from home. They should keep records “as they occur” as “timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year”.
- The ATO won’t accept estimates or a four-week representative diary or similar document under this method from 1 March 2023.
- When claiming the 67c an hour, taxpayers will also need to keep bills for costs included in the fixed rate, which covers electricity, gas, phone, the internet, stationery and computer consumables.
- Separate claims can be made for depreciation of computers or office furniture, repairs, cleaning and maintenance. The threshold cost for depreciation of an asset remains at $300.
- Workers “carrying out minimal tasks, such as occasionally checking emails or taking calls” were ineligible to claim because “you must be working from home to fulfil your employment duties”.
- Items used for actual work-use including phone, internet and electricity expenses are now included in the revised rate.
- Taxpayers no longer need a dedicated home office to use the fixed rate method.
- Assets and equipment such as technology items and office furniture are not included in the revised rate and need to be claimed separately.
- You can’t claim for coffee, tea, milk and other general household items consumed in a typical work from home day.
The ATO are in the process of developing supporting materials about the revised working from home deduction rules, including web content and a fact sheet to assist taxpayers and their advisers. In the meantime, you can read the ATO’s media release here or contact your Arabon accountant for a discussion about how this rate change may affect your situation.