Working arrangements for many individuals and small businesses in Australia changed with the onset of the COVID-19 pandemic back in early to mid-2020. Since then, these working arrangements have evolved, and with them, the costs incurred when working from home. To better reflect these contemporary working-from-home arrangements, the Australian Taxation Office (ATO) has made some recent changes to the way taxpayers can claim their relevant deductions. In this article we’ll summarise those changes and decipher what it means for you.
Existing Methods For Claiming Working From Home Deductions
Taxpayers have a choice of two methods when claiming work-from-home deductions: actual cost and fixed rate methods. The changes made by the ATO relate only to the fixed rate method and they came into effect on 1 July 2022. The revised fixed rate method can be used from the 2022–23 income year onwards.
The actual cost method remains unchanged.
Below is a current summary of the two methods and some important factors to keep in mind during the financial year and when you are getting ready to submit your tax return.
|What is it?
|Expenses you can claim?
|Things to note
Regardless of the method you choose, ATO Assistant Commissioner Tim Loh has reminded taxpayers of some essential factors to keep in mind:
- Double-check that you are eligible
- ‘To claim your working from home expenses, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls. Also, you must incur additional expenses as a result of working from home.’
- Keep clear and consistent records
- ‘No matter which method you use, make sure to keep records. This will give you more flexibility to choose the method that gives you the best deduction at tax time depending on your circumstances.’
- ‘From 1 July 2022 to 28 February 2023, the ATO will accept a record that represents the total number of hours worked from home (for example a 4-week diary). From 1 March 2023 onwards, taxpayers will need to record the total number of hours they work from home.’
- If in doubt, check with your accountant what you can claim
- ‘You can’t claim for things like coffee, tea, milk and other general household items, even if your employer may provide these kinds of things for you at work.’
- Take note of the year you’re claiming expenses for
- ‘If you are working out your claim for working from home expenses for 2021–22 or earlier income years, see Prior year work from home methods.’
- For items worth more than $300
- ‘No matter which method is used, if taxpayers purchase assets and equipment for work and it costs more than $300, they 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 a decline in value or depreciation).’
For further information
The changes mentioned above are now in effect so make sure you understand them carefully and begin applying them immediately.
For assistance in determining depreciation and keeping track of expenses, you can access the ATO’s:
And as always, if you need assistance or tax advice about claiming working-from-home expenses, make an appointment to see one of SG Advisory’s registered tax accountants. Our tax specialists will provide assurance that you are in compliance with your tax obligations.
Disclaimer: The information contained above is general in nature and should not to be considered as personalised taxation or accounting advice. Please consult one of our experienced tax accountants as taxation law, regulations and the way they affect your business will differ from year to year.