The Australian Taxation Office (ATO) released Practical Compliance Guideline (PCG) 2023/1 which sets out the revised rate for taxpayers wanting to claim work from home expenses using a fixed rate.
HOW ARE WORKING FROM HOME TAX DEDUCTIONS CHANGING IN THE 2023 FINANCIAL YEAR?
From the 2023 financial year onwards, taxpayers will only be able to claim working from home deductions based on either:
- The ATO’s revised fixed rate; or
- Actual costs
HOW CAN TAXPAYERS USE THE FIXED RATE METHOD AND WHAT ARE THE RECORD KEEPING REQUIREMENTS?
From 1 July 2022 onwards, taxpayers will be able to claim 67 cents per hour for each hour worked from home. The rate covers the following expenses:
- energy expenses (electricity and gas) for lighting, heating, cooling and electronic items used while working from home
- internet expenses
- mobile and home phone expenses, and
- stationery and computer consumables.
Individuals must be working from home while carrying out employment duties or while carrying on your business - the work must be substantive and directly related to their income-producing activities. Minimal tasks such as occasionally checking emails or taking phone calls while at home will not qualify as working from home for the purposes of PCG 2023/1.
The rate above does not include the decline in value of depreciating assets which can be claimed separately if the costs are not reimbursed by the employer.
For the 2022-23 income year, individuals who wish to use this method will need to comply with certain record keeping requirements and will need to maintain:
- a record which is representative of the total hours worked from home period between 1 July 2022 – 28 February 2023; and
- a record of actual hours worked from home between 1 March 2023 – 30 June 2023.
Records could include timesheets, rosters, logs of time spent accessing employer systems, time-tracking apps or a diary. Furthermore, individuals will need to keep one monthly or quarterly invoice for energy, mobile and home phone expenses. If records are not kept, individuals will not be able to rely on this guideline to claim working from home expenses.
ACTUAL COST METHOD
Claiming deductions based on actual costs may result in a greater tax deduction but that comes with more onerous record keeping requirements. To claim a tax deduction for actual costs, individuals need to maintain either:
- A record of the number of actual hours they worked from home during the income year; or
- A diary for a representative four-week period to show their usual pattern of working at home.
Furthermore, the ability to claim a considerable amount of expenses depends on whether the individual has kept appropriate records. For example:
-
For phone and internet, individuals need to work out their work-related use over a four-week representative period.
-
For other costs such as heating, cooling and lighting, individuals would need to work out the cost based on the total annual hours used for work related purpose and other factors.
In addition, an individual needs to keep all receipts, bills and other documentation which substantiate the additional running expenses they incurred while working from home, and how the work use was determined.
MORE INFORMATION
If you have any queries relating to working from home tax deductions, contact your local Moore Australia advisor today.