Changes for claiming a deduction for working from home expenses

The Australian Taxation Office (ATO) has changed how working from home expenses can be claimed by eligible taxpayers for the 2023 income year.

ATO announces changes to working from home expenses

The Australian Taxation Office (ATO) has revised the fixed rate (67 cents per hour) method and their record-keeping obligations when claiming additional running expenses incurred as a result of working form home in the 2023 income year.

If you have worked from home at any time from 1 July 2022 to 30 June 2023, you may be eligible to use the Australian Taxation Office's revised fixed-rate (67 cents per hour) method to claim your deductions.

You no longer need a dedicated home office or dedicated work area set aside in order to apply the revised fixed rate method. The previous 52 cents fixed rate method covered the decline in the value of home office furniture, energy expenses for heating, cooling, and lighting, and the cost of cleaning your dedicated home office.

If more than one taxpayer is working from home at the same time, each tax payer may be eligible to use the fixed rate method, alternatively each taxpayer could choose to calculate their running expenses using a different method, for example, one taxpayer could use the actual cost method and the other could use the fixed rate method.

Under the actual cost method you must appropriately apportion the running expenses.

What's covered by the rate

The following expenses are covered by the rate:

• energy expenses (i.e. electricity and gas) for lighting, heating/cooling, and to run electronic items used for work or business
• internet expenses
• mobile and home telephone expenses
• stationery and computer consumables (e.g., printing paper and printer cartridges)

How is the fixed rate calculated?

Under the revised fixed-rate method, a claim for the above running expenses is calculated at a fixed rate of 67 cents for each hour that you worked from home during the 2023 income year.

This is an alternative method to claiming for the above running expenses using the actual expenses method, which would require a separate claim for the work/business portion of each expense.

Claims for deductible running expenses not covered by the revised fixed-rate method (e.g., depreciation of a computer used for work or business) can be claimed under the actual method.

What records do I need to keep when using the ATO's revised fixed-rate method?

Taxpayers are also required to keep significantly more detailed records from 1 March 2023 to claim under the new rules. You will need to keep some receipts, bills or invoices of the running expenses you have incurred in order to verify your claim.

You will also need to keep a record (e.g., a timesheet, diary or similar record) of the number of hours you worked from home during the year, as follows:

• From 1 July 2022 to 28 February 2023 the ATO will generally accept a record of the number of hours worked from home over a representative period (e.g., a four-week period). This can then be used to estimate the total number of hours worked for this entire period.
• From 1 March 2023 to 30 June 2023, you will need to keep a record of the total number of actual hours worked from home. This effectively means that you will need to make a record (e.g., a diary entry) of the number of hours worked from home on each occasion that you worked from home.

Keeping records of working from home days

One of the most significant changes is that the Australian Taxation Office (ATO) will no longer accept estimates for hours worked from home from 1 March 2023.

To help with the new record keep requirements for working from home hours you can use Outlook or Teams to record the days that you work from home. To learn more about how to do this, have a look at Microsoft's blog post on the topic here.

Keeping records of running expenses

For energy, mobile, and or home phone and internet you will need to keep a monthly or quarterly bill. For stationery and computer consumables, you must keep a receipt for each item purchased.

Previous method for claiming working from home expenses as deductions

Prior to 1 July 2022, the following record-keeping concessions applied to taxpayers using the fixed-rate method (52 cents per hour):

• taxpayers were not required to keep receipts for additional running expenses incurred.
• where a taxpayer's working from home hours were regular or consistent during an income year, the ATO generally accepted a record (e.g., a diary) that showed how many hours the taxpayer worked from home during a four-week representative period. This record could then be used to calculate how many hours the individual worked from home for the entire year.

Next Steps

If you have worked from home during the 2023 income year, please contact our office to discuss your situation further as you are likely to be affected by the above changes.

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Disclaimer

Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.