The Australian Taxation Office (ATO) has updated its approach to claiming expenses for working from home. In the past during Covid-19 period, taxpayers could choose between two fixed rate methods, depending on their scenario. These included an 80 cents per hour rate or a 52 cents per hour rate, which only applied to those with a dedicated workspace. However, from the 2022-23 financial year onwards, the ATO has introduced a new ‘fixed rate’ method that combines the previous two methods. Taxpayers can now claim 67 cents per hour for all expenses related to working from home, including energy expenses, phone usage, internet, stationery, and computer consumables.

If you work from home, it is essential to keep records of all the hours you work from home, as well as at least one copy of each the bills or invoices for any expenses you incurred. You need to retain these records for at least five years so that you can prove your claim in case the ATO comes calling. Moreover, the ATO will no longer accept estimates or a sample diary over a four-week period as proof. Instead, you must have an accurate record of the total number of hours worked from home. You can keep an electronic record or a PDF summary of your calendar.

The first issue for claiming any deduction is that there must be a link between the costs you incurred and the way you earn your income. If the expense does not relate to your work or only partially relates to your work, you cannot claim the full cost as a deduction. The second key issue is that you must incur costs associated with working from home. If you live with your parents and do not pay any expenses for running the home, you cannot claim deductions for working from home, even if you are paying board.

For taxpayers who have high expenses, the actual cost method might be a better option. This method allows taxpayers to claim the actual additional expenses they incurred when working from home. However, they will need to keep records of these expenses and prove the extent to which they relate to their work. Examples of expenses that can be claimed under this method include the decline in value of home office furniture, electricity and gas expenses, phone and internet expenses, stationery and computer consumables, and cleaning expenses for a dedicated home office.

When it comes to claiming deductions, it is important to remember that there are no restrictions on claiming outside standard office hours. If you work from home outside standard office hours or over the weekend, you need to keep an accurate record of the hours worked to maximize your deductions.

In summary, the ATO has updated its approach to how you claim expenses for working from home. Taxpayers can now choose between a new fixed rate method and the actual cost method, depending on which one works best for their scenario. For the fixed rate method, taxpayers can claim 67 cents per hour for all expenses related to working from home. To claim the actual cost method, taxpayers must keep records of all additional expenses they incurred when working from home, and prove the extent to which these expenses relate to their work. Regardless of which method you choose, keeping accurate records is crucial to prove your claim.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 our info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.