Changes to Working from Home Deductions in 2023

The Australian Taxation Office (ATO) introduced new rules for claiming deductions for costs incurred while working from home on February 16, 2023. These rules are applicable from July 1, 2022 and are summarised below:

• Methods No Longer Applicable: The previous methods of claiming deductions, including the shortcut method ($0.80 cents per hour) and the old fixed rate method ($0.52 cents per hour), can no longer be used to calculate home office deductions.

Fixed Rate Method

The revised fixed rate method, applicable from July 1, 2022 onwards, involves a fixed rate of $0.67 cents per hour worked from home. This rate covers expenses such as energy (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No separate deduction for individual home office expenses covered by this rate can be claimed.

• Inclusions: Unlike the previous fixed rate method, the revised method includes phone usage and internet expenses. This means that if you use your mobile phone or home internet for work purposes, you cannot claim a separate deduction for these items if you are using the fixed rate method.

• Separate Claims: Some expenses can still be claimed separately. These include the depreciation of assets used while working from home (computers, office furniture), repairs and maintenance of these assets, and costs associated with cleaning a dedicated home office.

• Home Office Requirement: The revised fixed rate method doesn’t require a dedicated home office space. If you work from any part of your home, such as the kitchen or living room, you can still claim a deduction.

• Compliance and Substantiation: From March 1, 2023, you need to keep a record of all the hours worked from home for the entire income year. Before that, a 4-week representative diary or similar document will be required for the period between July 1, 2022, and February 28, 2023. The ATO won’t accept estimates or representative diaries for periods after March 1, 2023. Records can be in various forms, such as timesheets, rosters, or logs, and must cover each expense covered by the fixed rate per hour.

Actual Cost Method

The actual cost method remains unchanged. It allows you to claim the actual work-related portion of all running expenses. To use this method, you must have a dedicated home office. Detailed records are required for expenses claimed under this method, including receipts, bills, and records of hours worked from home.

• Expenses Covered: The “Actual Cost Method” allows you to claim the following expenses individually:
  • Electricity and gas bills
  • Home and mobile phone expenses
  • Internet expenses
  • Stationery and computer consumables
  • Cleaning your home office
  • Depreciation of office equipment that cost more than $300 (e.g., computer desk)
  • Office equipment that cost less than $300.

• Usage Allocation: When using this method, you need to specify how much of each item’s use was for work purposes. For instance, if you’re claiming your home internet expenses, you should calculate the percentage of your internet usage that is related to work tasks.

• Record Keeping: To utilize the “Actual Cost Method,” you must maintain detailed records of all items claimed. You can do this by:
  • Maintaining receipts and utilities bills for items claimed.
  • Keeping a continuous 4-week diary that tracks your usual work-from-home pattern, which helps establish a representative pattern of use and can be used to calculate the work-related portion of each item.
  • Maintaining a full 12-month record of the total number of hours you worked from home during the year. This gives a comprehensive overview of your work habits.

• Reimbursement by Employer: If your employer has already reimbursed you for certain expenses, you cannot claim a deduction for those expenses.

Should you have any queries in relation to working from home or any other claimable deductions don’t hesitate to contact our office.

ATO Fact Sheet – Working from home deductions: https://www.ato.gov.au/uploadedFiles/Content/IAI/Downloads/Toolkits/TaxTimeToolkit_Workingfromhomededuction.pdf