Reflecting changing contemporary working habits, the ATO has revised its Working from Home (WFH) guidelines for claiming deductions.
Firstly, to be eligible to claim WFH expenses, you must be working from home to carry out employment duties (not just checking a few emails or taking calls). You must also incur additional expenses as a result from working from home.
The ATO gives the option of one of two methods when claiming WFH deductions: either the ‘actual cost’ or a ‘fixed rate’ method.
Under the newly revised ATO WFH guidance, only the fixed rate method is changing.
Fixed Rate method
Taking effect from 1 July 2023 the cents per work hour fixed rate will increase from 52 to 67 cents per work hour.
Phone, internet, gas, and electricity expenses are included in the revised rate, also stationery and computer consumables such as printer cartridges and paper for printers. No further deductions for expenses covered by the rate can be claimed by this method.
Any assets and equipment (for example technology devices and office furniture) will need to be claimed separately. Also claimable are any repairs and maintenance of these assets, and for those with dedicated workspaces, any associated cleaning costs.
The threshold cost for depreciation of an asset remains at $300.
Actual Cost method
The actual cost method has not changed. You can claim the actual work-related portion of all running expenses. A detailed record is required of all working from home expenses being claimed, along with a record of how you have calculated the work-related and private portion of your expenses. Either by actual hours worked at home or a similar 4-week period documentation
representing the typical pattern of working at home.
Home office record-keeping
The revised rules no longer require a dedicated home office workspace to use the ‘fixed rate’ method.
However, beware, from 1 March 2023 the ATO has warned it will no longer accept estimates or the previously accepted 4-week representative diary, under the fixed rate method records showing the total number of hours you worked from home as they occurred for the entire year will be required.
This can be shown in the form of time sheets, rosters, log times accessing business systems or a diary.
Records must also be kept for each expense incurred which is covered by the fixed rate per hour, for example providing at least one of the phone/internet and electricity bills.
It sounds tedious if you are not in the habit of keeping receipts, but start now, be prepared, get into good record keeping habits to give yourself the choice of option at tax time that will provide you with the greatest deduction.
Record everything – keep a detailed diary throughout the year (What days did you work from home? How many hours did you perform work activities?)
Retain receipts – If you incur a cost when working from home, keep the invoice/receipt. This includes office furniture, home office cleaning expenses and documents related to your home expenses such as electricity and other utility bills.
Be realistic – Just because your employer may have offered morning tea at work does not mean morning tea costs at home can be claimable. Neither are claims for home office décor.
Reach out – When submitting your tax return, if you are unsure about anything, seek advice from your Initiative accountant.