| UPDATED (as of 22 November 2023) |
| On 15 February 2023, the ATO finalised its new more stringent regime for Work From Home (WFH) tax deductions. The change, which was scheduled for 1 January in draft PCG 2022/D4 will now be in force from 1 March 2023. |
| The ATO has also provided greater guidance on the documentation required for the actual costs method which includes timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year. Those seeking to access this fixed rate method (with a new flat rate of 67 cents) will be required to keep bills or all costs included in this method. |
| For more information on how these methods are calculated see below. |
If you perform some or all your work from home and intend to claim work from home tax deductions in your 2023 tax return, it’s important you’re aware of the recent changes. Many Australians now work in hybrid positions, where working from home a few days a week has become the norm. As more and more employers move to a hybrid work model, it stands to reason that the number of Australians looking to claim work from home tax deductions will increase, too. If you need to claim a work from home tax deduction, then make sure you’re aware of the recent changes that have come into effect.
The ATO’s Draft Practical Compliance Guideline – Claiming a deduction for additional running expenses incurred while working home – replaces the Fixed Rate Method of 52 cents per hour with a 67 cents per hour flat rate that includes tighter eligibility criteria, effective from 1 July 2022.
In addition, the Shortcut Method of 80 cents per hour introduced in March 2020 ceased to apply after 30 June 2022. From 1 July 2022, the Actual Costs Method was introduced. This method requires workers to have a designated work area not shared with other areas of the home and keep records demonstrating expenses and depreciating assets bought and used while working from home.
Changes to the Fixed Rate Method
Firstly, to be eligible to claim the revised 67 cents Fixed Rate Method you must meet all the following criteria:
- Work from home must be substantive and directly related to the income producing activities.
Minimal tasks like checking emails or making work related phone calls will not be considered substantive. You will not be required to have a designated work space at home. - You must incur additional running expenses and must not be reimbursed for the costs. An employee who works from home two days a week but resides with his/her parents and does not contribute to the running costs will not be eligible to claim a home office deduction. Additional running costs include internet, electricity, mobile phone and stationary expenses.
- You must keep relevant records for the time spent working from home.
Timesheets or rosters are required to show the exact number of hours spent working from home. The old method of keeping a diary for one month and extrapolating that over the year will not be accepted. You must also provide at least one invoice for the additional running costs such as electricity, internet, mobile phone or stationery. If the invoice is not in your name, you must show evidence that the expense is shared. This could include a bank transaction or evidence that the bank account used to pay the expense was a shared account.
This method covers the cost of electricity, internet, mobile and stationery, on what the ATO considers to be a fair and reasonable basis. This means you cannot claim a separate deduction for any of these expenses. You may still claim depreciation for assets used to carry out your employment duties. However, you must keep a four-week record to show personal and income producing use of the depreciating assets.
| Fixed Rate Method | Pre 30 June 2022 | Transition period 1 July 2022 – 31 December 2022 | 1 January 2023 onwards |
| Rate per hour | 52c | 67c | 67c |
| Evidence of work | Diary representative of hours worked in period | Diary representative of hours worked in period | Must maintain actual timesheets or rosters for the entire financial year |
| Eligible to claim additional expenses separate (phone, internet, stationery) | Yes | No, these are included in the rate. Must show evidence that additional expenses have been incurred | No, these are included in the rate. Must show evidence that additional expenses have been incurred |
| Eligible to claim decline in value for work related assets? | Yes | Yes, must keep invoice and 4-week record of personal and income producing use | Yes, must keep invoice and 4-week record of personal and income producing use |
Putting systems in place now to strengthen your record keeping can make submitting your tax return with your work from home tax deductions less stressful. Additionally, this comprehensive and diligent record keeping can also make a marked difference to your tax return.
Contact William Buck to discuss your tax needs
For some, 30 June is a day to look forward to. For others, it can be a tense and busy time as they try to get their tax statements and deductions claims in order. But tax time does not have to be stressful. At William Buck, we provide a range of comprehensive accounting and financial advice services.
If you are looking to claim work from home tax deductions or have questions about what work from home deductions you are able to claim, you can get in touch with our team of professionals.
We can also help you determine what to claim on tax aside from work from home tax deductions. Don’t waste hours trying to identify how to claim work from home expenses. Get in touch with the experts to help you make sense of your tax return.
For more information on what’s required or to discuss your individual tax needs, contact your local William Buck advisor.
