ATO announces changes to working from home deductions

The record keeping requirements and methods for calculating working from home deductions has changed for the 2022–23 income year onwards.

From the 2022–23 income year, the methods available to calculate working from home deductions are the:

  • revised fixed rate method
  • actual cost method.

While the actual cost method remains unchanged, the revised fixed rate method has been updated to better reflect contemporary working from home arrangements, making it easier to calculate expenses and avoid time-consuming apportionment calculations.

The revised fixed rate method:
  • has increased from 52 cents to 67 cents per hour worked from home
  • removes the requirement to have a dedicate home office space
  • works out the claim for
    • electricity and gas
    • phone and internet usage
    • computer consumables
    • stationery
  • allows taxpayers to separately claim the work-related portion of the decline in value of depreciating assets – such as office furniture and technology.

The revised fixed rate method can also be used by businesses that operate some or all of their business from home to claim home-based business expenses.

To use the revised fixed rate method, you must:

  • incur additional running expenses as a result of working from home
  • have a record of the total number of hours you work from home and the expenses you incur while working at home
  • have records for expenses the fixed rate per work hour doesn’t cover and that show the work-related portion of those expenses.
Record keeping for the fixed rate method

To claim your working from home deduction using this method, you must keep:

  • a record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document
  • at least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses

You need to keep your records for 5 years (in most cases) from the date you lodge your tax return.

You must keep records for depreciating assets from the time you buy them, that shows

You must also keep these records for other running expenses you are claiming as a separate deduction.

You need to keep these records for 5 years from the date of your last claim for decline in value.

Record keeping for 2022–23

If you haven’t been keeping a record of the actual hours you worked from home, for the 2022–23 income year only, you must be able to provide both:

  • a representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023 – for example, any kind of record of the hours you worked from home for a particular period that you can apply to the whole 8 month period.
  • a record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023.

If you haven’t kept receipts or written evidence of your depreciating assets, you may still be able to claim a decline in value deduction if:

  • you didn’t keep it because you were using the fixed rate method or shortcut method to calculate your working from home deduction in the income year you purchased the asset
  • you have other evidence or records which show
    • you incurred the cost of the depreciating asset
    • when you bought the depreciating asset
    • your work-related use of the depreciating asset.
The actual cost rate method:

Using the actual costs method, you work out your deduction by calculating the actual additional expenses you incur when working from home. This includes expenses you incur for:

  • 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.

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.

In limited circumstances, you may also be able to claim occupancy expenses (such as mortgage interest or rent).

Record keeping for actual costs method

To claim your work from home expenses using actual costs, you must keep:

  • either a record showing
    • the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet
    • a continuous 4-week period that represents your usual pattern of working at home – for example, a diary.

You must also keep records that show:

  • the additional running expenses you incurred while working from home, such as receipts, bills and other documents
  • how you worked out the amount of your deduction.

Information sourced from the ATO website https://www.ato.gov.au/