The COVID-19 pandemic has drastically altered the way we work, with many Australians now working from home. As a result, the Australian Taxation Office (ATO) has announced changes to tax deductions for working from home in the 2022-23 financial year.
The Australian government has announced its intention to remove the tax deduction for working from home in 2023. This decision has been met with criticism from workers and labour unions who argue that the deduction is essential, particularly for those who work from home full-time. However, the ATO has clarified that the temporary shortcut method, which was introduced in response to the pandemic, will still be available for the 2022-23 financial year.
The temporary shortcut method allows taxpayers to claim a rate of 80 cents per hour for all running expenses incurred while working from home. This method has been popular with workers, as it simplifies the process of calculating tax deductions. The ATO has also noted that the fixed-rate method and actual cost method will still be available for taxpayers who prefer to use those methods to calculate their deductions.
As we move towards a post-pandemic world, it will be interesting to see how the Australian government responds to the ongoing demand for tax deductions for working from home.
For now, these are the new rules and some details of it you should be across.
- Fixed rate now 67 cents per hour for 2023 (up from 52 cents per hour 2022)
- Rate includes claim for: energy expenses (electricity and/or gas) for lighting, heating/cooling and electronic items used while WFH, internet expenses, mobile and/or home phone expenses, stationery and computer consumables
- From 1 July 2022, taxpayers may choose between either the actual cost method or the revised fixed rate method to calculate their deductions for expenses incurred while WFH. Under the revised fixed rate method, taxpayers may also separately claim the decline in value of any depreciating assets they used to WFH, and any other running expenses incurred as a result of WFH that are not included in the revised fixed rate method. A dedicated work area at home is not required.
The ATO’s advice to keep accurate records is a reminder that taxpayers need to ensure they are claiming deductions correctly to avoid potential issues with the ATO.
- Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document under this method from 1 March 2023.
- Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.
- Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses).
The ATO is reminding taxpayers that if they are claiming their actual working from home expenses, they can’t claim a deduction for expenses which have already been reimbursed by their employer.
No matter which method is used, if taxpayers purchase assets and equipment for work and it costs more than $300, they can’t claim the full amount immediately. For each of these items, the deduction must be claimed over a number of years and the work portion claimed (known as decline in value or depreciation).
The ATO has online calculators to help taxpayers work out the decline in value of assets and equipment purchased. There is also the myDeductions tool in the ATO app, which can help keep track of expenses.
If you need assistance or advice about claiming working from home expenses, please reach out to the BridgePoint Group team and we will provide you the support you need.