ATO unveils changes to working from home deductions for 2022-23

These changes will see a revised fixed rate method of 67 cents, while the actual cost method will remain unchanged. 

The ATO details this revised fixed rate method will apply from 1 July 2022, and can be used when taxpayers are calculating deductions for their 2022–23 income tax returns.

ATO Assistant Commissioner Tim Loh says these changes will provide benefits for those using the revised fixed rate in 2022–23.

"Items that are difficult and tedious for everyday Aussies to calculate actual work-use, like phone, internet and electricity expenses, are included in the revised rate,” Mr Loh said. 

“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.”

Director of Tax Communications at H&R Block Mark Chapman does not believe individuals will be better off under the fixed rate method. 

“A typical individual stands to claim deductions of about $750 using the new 67 cents per hour fixed rate. Whereas for the same expenses they would have been able to claim $1,379 under the old regime,” Mr Chapman said.

“In addition, taxpayers need to be aware of ‘double dipping’. If they use their personal mobile phone for work purposes and choose to claim the 67 cents per hour fixed rate, they cannot then claim a separate deduction for their mobile phone.” 

CPA Australia Senior Manager Tax Policy Elinor Kasapidis said some Australians will still be under the impression they can claim a work from home deduction in the same way as they did during the height of the pandemic. 

“This will not be the case after March 1, 2023,” Ms Kasapidis said. 

“Australians will need to keep an ongoing diary for each day of the year they work from home from March onwards. A four-week diary representative of the year isn’t going to cut it. They also need to keep some records about their expenses incurred while working from home, such as copies of utility bills.”

What is the revised fixed-rate method?

As outlined by the ATO, the revised fixed-rate will see an increase from from 52 cents to 67 cents.

This revision to the fixed rate covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. 

Importantly, the fixed rate method doesn’t require taxpayers to have a dedicated home office space to claim working from home expenses for the 2022-23 financial year.

Items that can be claimed separately for 2022-23 include: 

• The decline in value of assets used while working from home, such as computers and office furniture.
• The repairs and maintenance of these assets.
• The costs associated with cleaning a dedicated home office.

To keep tabs on hours worked from home over the course of the financial year, taxpayers need to keep a record as under the revisions, the ATO won’t accept estimates, or a 4-week representative diary or similar document from 1 March 2023.

The ATO details records of hours worked from home can be in any form provided they are kept as they occur - for example timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.

Further, records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour - for example if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses. 

The four ‘R’s’ for tax time

CPA Australia’s Elinor Kasapidis has outlined four Rs to help Aussies get their tax return right come the conclusion of the 2022-23 financial year. 

Record everything

“Keep a detailed diary throughout the year noting down when you worked from home. Hold on to documents relating to your home expenses, such as electricity and other utility bills,” Ms Kasapidis said. 

Retain receipts

“If you incur a cost when working from home, you should keep a receipt. This includes new office furniture and home office cleaning expenses,” she said. 

Be Realistic

“Be realistic when submitting your tax return,” she said. 

“The tax office is unlikely to accept a deduction for a packet of TimTams eaten in your coffee break at home. As much as your colleagues like to see your pot plants, the ATO won’t want to see claims made for office décor.”

Reach out

“Seek advice when submitting your return and get help from a tax agent if you’re unsure. Reach out to a Certified Practicing Accountant (CPA) who can help you understand your obligations and help you get your tax return right.”

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