Tax Advice | Working From Home Deductions

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.

	Actual Cost Method	Fixed Rate Method
What is it?	You work out your deduction by calculating the actual additional expenses you incur when working from home	You can now claim 67 cents for each hour you work from home during the relevant income year (up from 52 cents the previous financial year
Expenses you can claim?	the decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices electricity and gas (energy expenses) for heating, cooling and lighting home and mobile phone, data and internet expenses stationery and computer consumables, such as printer ink and paper cleaning your dedicated home office	home and mobile internet or data expenses mobile and home phone usage expenses electricity and gas (energy expenses) for heating, cooling and lighting stationery and computer consumables, such as printer ink and paper
Things to note	Where you incur running expenses for both private and work purposes, you need to apportion your deduction. You can only claim the work-related portion as a deduction You can’t claim a deduction for expenses that have already been reimbursed by their employer In limited circumstances, you may also be able to claim occupancy expenses (such as mortgage interest or rent)	The rate per work hour (67 cents) includes the total deductible expenses for the above additional running expenses. If you’re using this method, you can’t claim an additional separate deduction for these expenses You no longer need a dedicated home office to use the fixed rate method Assets and equipment that typically give taxpayers a bigger deduction, such as technological items and office furniture, are not included in the revised rate and need to be claimed separately

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.