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Work from home deductions 2023: important changes
23 January 2023 | Minutes to read: 3

Work from home deductions 2023: important changes

By Eric Flammang and Jessica Mullan

If you perform some or all your work from home and intend to claim a home office deduction in your 2023 tax return, it’s important you’re aware of the recent changes.

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 01 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, requiring workers to have a designated work area not shared with others 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:

  1. 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.

  2. 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.

  3. 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 but must show evidence that additional expenses have been incurred No but 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 will ease the burden come tax time and make a marked difference to your tax return. For more information on what’s required or to discuss your individual tax needs, contact your local William Buck advisor.

Work from home deductions 2023: important changes

Eric Flammang

Eric is a registered tax agent and member of the Institute of Chartered Accountant of Australia and New Zealand and holds a Master of Professional Accounting and Master of International Tourism & Hospitality Management.

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Work from home deductions 2023: important changes

Jessica Mullan

Jessica is a Supervisor in our Gold Coast Business Advisory team. Jessica provides advisory services to family-owned businesses and high net wealth individuals. A Chartered Accountant, she has a record for achieving results for clients in a range of industries including Education, Manufacturing, Construction and Ecommerce.

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