If you've spent the past few years working from home, you might think you're across what expenses you can claim on your tax return. Think again.
The Australian Taxation Office (ATO) has refreshed the way that taxpayers claim deductions for costs incurred when working from home.
You need to be aware of these changes so that you can keep the appropriate records to maximum your tax claims in your 2023 Tax Return, with some taxpayers also facing extra record keeping responsibilities from 1 March. Here’s what you need to know…
WHAT ARE THE KEY CHANGES?
From 1 July 2022, the ATO has explained that taxpayers who are working from home can claim deductions based on their actual expenses, or they can adopt a revised fixed rate method which uses a rate of 67 cents per hour.
Actual cost method
The actual cost method hasn’t changed. Taxpayers can claim the actual work-related portion of all running expenses.
This includes keeping detailed records for all the working from home expenses being claimed, including:
- all receipts, bills and other similar documents to show taxpayers have incurred the expenses, a record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4-week period to show the usual pattern of working at home).
- a record of how taxpayers have calculated the work-related and private portion of their expenses (for example, a diary or similar document kept for a representative 4-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop).
Taxpayers are being reminded by the ATO that they cannot claim a deduction for expenses that have already been reimbursed by their employer when claiming their actual working from home expenses.
Revised fixed rate method
The revised fixed rate method can be used from the 2022–23 income year onwards. The changes are:
- The cents per work hour has increased from 52 cents to 67 cents.
What’s covered by the rate
- The revised fixed rate of 67 cents per work hour covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed if you use this method.
What can be claimed separately
- The decline in value of assets used while working from home, such as computers and office furniture.
- The repairs and maintenance of these assets.
- The costs associated with cleaning a dedicated home office.
- The revised fixed rate method doesn’t require taxpayers to have a dedicated home office space to claim working from home expenses.
VERY IMPORTANT: THE RECORDS YOU NEED TO KEEP
You need to keep the following records to prove your working from home tax deductions for the 2023 financial year:
- You will 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 you have incurred which is covered by the fixed rate per hour (for example, if you use your phone and electricity when working from home, you must keep one bill for each of these expenses).
No matter which method is used, if you purchase assets and equipment for work and it costs more than $300, you 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).
Please contact our office and speak with one of our expert accountants if you need any assistance with this so we can help you to maximise your tax deductions in your 2023 and future year Tax Returns.