Proposed changes to working-from-home deductions
by Brian Spurrell
25th December 2022
MANY OF YOU will now be accustomed to claiming expenses incurred whilst working from home (WFH), a lot of this largely due to the lockdown measures put in place during the early years of the pandemic.
With much of the workforce WFH, the Australian Taxation Office (ATO) instigated an $0.80 per work hour “shortcut method” for claiming home expenses from March 1, 2020, to June 30, 2022.
The shortcut method has been very popular, as the expenses included could be claimed based on the production of a timesheet or work diary — much simpler than the Fixed Rate Method or Actual Cost Method.
New guidelines in development
The ATO is in the final stages of updating the methods available to claim WFH expenses for the 2022/23 tax year and beyond.
The Claiming a deduction for additional running expenses incurred while working from home — ATO compliance approach PCG 2022/D4 document is a good indicator of what taxpayers looking to claim WFH expenses in the 2022/23 financial year can expect.
I have reproduced key points from this document; these new guidelines will likely take effect from July 1, 2022.
The draft guidelines indicate that from July 1, 2022, the $0.80 method and its predecessor, the $0.52 per hour rate, will no longer be available and will be replaced with the Revised Fixed Rate of $0.67 per hour.
The ATO will allow taxpayers to continue to claim their actual expenses or use the Revised Fixed Rate Method, as explained below:
- You do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the information in this guideline.
- If more than one taxpayer in your household is working from home at the same time, each taxpayer will be able to rely on the guideline provided that each taxpayer meets the requirements for deductibility.
- Taxpayers working in the same household at the same time can choose to use either the revised fixed rate or actual expenses method.
- If you do not use the revised fixed rate method, you will need to use the actual expenses method.
- The information should be interpreted to be in effect from July 1, 2022
The Revised Fixed Rate Method covers the following additional running expenses you incur on a fair and reasonable basis by using the revised fixed rate of $0.67 per hour worked from home.
- Energy expenses (electricity or gas) for lighting, heating/cooling and electronic items used while working from home.
- Internet expenses
- Mobile and/or home phone telephone expenses, and
- Stationery and computer consumables
To calculate your total deduction for running expenses using the Revised Fixed Rate Method you:
- a) Calculate the number of hours you worked from home during the income year based on your records.
For only the 2022/23 income year, you need to keep:
- A record representative of the total number of hours worked from home from July 1, 2022, to December 31, 2022.
- A record of the total number of actual hours you worked from home for the period January 1, 2023, to June 30, 2023.
Note, for 2023/24, and later years, you must keep a record for the entire income year of the actual number of hours you worked from home during that income year.
- b) Multiply the total number of hours you worked from home during the income year by 67c per hour.
- c) Calculate the work-related decline in the value of any depreciating assets that you used to work from home during the income year and any other running expenses incurred and not accounted for in the 67c per hour rate.
- d) Add the amounts calculated from b) and c) above, and this total will be the amount you claim as your deduction for working from home at D5 in your Work Related Expenses Schedule of your tax return.
Further information can be obtained from the Draft Practical Compliance Guideline PCG 2022/D4; it can be found on the ATO website or by entering the above title into your search engine.
Note that the document is still in its draft form but is indicative of what will be legislated; please check the ATO website or ask your financial advisor for details when it reaches its final form.
The content of this article is not intended to be relied upon as professional advice and should not be used as such.
If you have any questions, you should consult a registered tax agent.
Brian Spurrell B A, B Com, Dip Ed, FCPA, Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113
0412 011 946