The revised fixed rate method is effectively the old fixed rate hourly deduction, increased from 52 cents per hour to 67 cents per hour. It is less generous than the shortcut method (80 cents per hour) during the COVID-19 pandemic. The shortcut method is no longer available as of 30 June 2022.
The ATO has already issued Practical Compliance Guidelines outlining its compliance approach on claiming home office expenses i.e., working from home – “PCG 2023/1 Claiming a deduction for additional running expenses incurred while working from home”.
To use the revised fixed rate method, you must:
- incur additional running costs as a result of working from home;
- 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 documents; and
- 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.
By the way, you need to keep these records for 5 years from the date of lodgement of your income tax returns. No records, no substantiation, no tax deduction!
You can claim 67 cents for each hour you work from home during the year ending 30 June 2023. The rate includes the additional running expenses you incur for:
- home and mobile internet or data expenses;
- mobile and home phone usage expenses;
- electricity and gas (energy expenses) for heating, cooling and lighting; and
- stationery and computer consumables, such as printer ink and paper.
You can separately claim a deduction for the work-related use of technology and office furniture such as chairs, desks, computers, and bookshelves. These are generally depreciating assets that decline in value over time. You can also claim the repairs and maintenance of these items.
Record keeping for 2022–23 for revised fixed rate method
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.
Actual cost method
The actual cost method remains unchanged. To use the actual cost method to claim actual expenses, you must incur additional running costs as a result of working from home and be able to substantiate these expenses. The actual cost method allows you to claim a deduction for the actual expenses you incur as a result of working from home.
You may be able to claim a deduction for each of the expenses you incur, such as:
- data and internet;
- mobile and home phone usage;
- electricity and gas;
- computer consumables (e.g., printer ink);
- stationery;
- the decline in value of assets used while working from home, such as computers and office furniture, as well as any maintenance and repairs of these items; and
- cleaning – only if you have a dedicated home office.
To claim your work-from-home expenses using actual costs, you must keep a record showing:
- the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet; or
- 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; and
- how you worked out the amount of your deduction.
What should I do now?
You should speak to your accountant to better understand how the impact of the revised working-from-home tax deduction rules. Please contact your professional adviser if you’d like more information about the revised rules and associated impact on your income if you are working from home either on a full-time or part-time basis.
