In a recent announcement the Australian Taxation Office have energetically orated that they have “refreshed” the way that taxpayers claim deductions for costs incurred when working from home.
At times I refresh my glass of tepid wine with some cold stuff. I feel refreshed after a shower, and I occasionally freshen up the smelly bin cupboard with a spray of Glen 20. Full marks to the ATO marketing team for effort, but I’m not convinced that the term passes the smell test in this case.
Assistant Commissioner Tim Loh was on a high as he promoted the revitalised changes.
The new rules apply from 1 July 2022. Prior to that, you had a choice of three methods to claim work from home deductions such as electricity, depreciation, phone and internet.
- Shortcut method – which allowed 80c for every hour worked from home. This was a temporary COVID related measure that covered all running costs.
- Fixed-rate method – which allowed 52c for every hour worked for certain running costs, but phone, internet and stationery were claimed separately. Depreciation of home office furniture was included in the hourly rate, whereas depreciation of electronic gear wasn’t.
- Actual cost method – keeping records of all actual costs incurred.
For the 2022/23 tax year, employees and business owners working from home will have a choice of two methods only – a revised fixed rate of 67c per hour, or the actual cost method.
I’m all for minimalism and feel rejuvenated going from three methods to two. But that’s about where the simplicity ends.
The revised rate now covers electricity and gas, internet, phone costs, stationery and computer consumables. It does not include cleaning and depreciation of home office furniture or electronic equipment like laptops, printers, mobile phones and other devices.
To claim work from home expenses, taxpayers must have incurred the costs (and keep at least one receipt for each type), but don’t need to have a specific home office set aside. The ATO found the kitchen table most unacceptable pre-COVID but have since embraced it as a legitimate workspace. Plus, it has plenty of room for a refreshing 4pm cocktail.
However, you’ll need a specific home office set aside if you want to claim your Glen 20 or other cleaning costs. Confusing huh?
Now here’s the real kicker. Under the old rules you could use any four-week period to represent an estimate of your work-from-home hours. You still could up until 28 February 2023. But from 1 March you need a written record of every hour worked from home. This might be timesheets, computer logs, or perhaps you can complete a good old-fashioned diary at the end of each day as you sip away at your mojito.
How refreshing!
Key points:
- To make a claim using the new hourly rate you must keep a record of all hours worked from home from 1 March 2023
- Additionally you’ll need a copy of an invoice for each type of expenses (electricity, mobile phone, internet etc.)
- We don’t need to see your records, but you need to use these to tell us at year end how many hours you worked from home so we can calculate your claim.
Related blog:
Home office vs place of business
Author: Mark Douglas
Email: mark@faj.com.au
