ATO changing the way you claim working-from-home expenses

For those individuals who work from home, you’ll find some changes when it comes to lodging your working-from-home expenses this financial year.

From 1 July 2022, the ATO has explained that taxpayers who are working from home can claim deductions based on their actual expenses, or they can potentially adopt a revised fixed rate method using a rate of 67 cents per hour.

Previous fixed rate method

Previously, you could claim 52c for every hour worked from home to cover home office running costs including running and occupancy costs.

You could then separately claim the work-related portion of expenses for work equipment, stationery, computers, printers and other consumables.

Revised working-from-home deductions method options

1. 67c fixed rate method

The fixed rate system for calculating your working-from-home expenses has moved from 52c to 67c and now covers all home office expenses.

If choosing this method, you will not separately claim individual expenses (ie – such as a new computer). However, you can potentially still claim depreciation deductions for assets used while working from home (e.g. computer, desk, chair, etc).

2. Actual cost method

The actual cost method remains unchanged.

If choosing the actual cost method, you continue to claim the work-related portion of all running expenses.

Pros and cons of the new fixed rate method

The new 67c flat rate method will suit those who:

  • Prefer a simple and straightforward deductions method
  • Are not avid invoice and receipt keepers
  • Do not log their time worked from home in timesheets, diary or the like.

However, for those who do purchase a decent amount of office equipment, who keep receipts and track their hours worked, then it is predicted you may be worse off with the revised 67c flat rate method.

The choice is yours… with conditions

The good news is, the choice is yours.

You can opt to go with the fixed rate method or continue with the actual cost method and separately claim your expenses.

However, there is a catch.

You are more likely to receive a tap on the shoulder from the ATO if you stick with the actual cost method, as opposed to switching to the new fixed rate method.

This should not be a problem if you:

  1. Keep all receipts and invoices
  2. Can show your time worked from home with some form of record-keeping. Whether it be via lodging timesheets, a written diary or time-keeping software such as Toggl.

If you choose the actual cost method, it will involve more serious record-keeping, especially proportioning your private vs work-related expenses – such as phone calls, time spent on the internet etc.

You must keep a representative record of the total number of hours worked from home between 1 July 2022 and 28 February 2023 and have actual hours recorded for work between 1 March 2023 and 30 June 2023 via timesheets, rosters or a daily diary.

Which method is best for you?

Firstly, answer these questions:

  1. Do you have receipts/invoices for all purchases?
  2. Do you have all your itemised bills for your phone/internet/electricity?
  3. Have you tracked your time worked from home between March 1st 2023 and June 30 2023?

If you answer no to the above questions, you are best to switch to the 67c fixed rate method.

If you answer yes, then it may be worth the effort to continue with the actual cost method and separately deduct individual expenses.

Just be made aware you may be more likely questioned by the ATO and will need to produce accurate record-keeping to back up your claims.

For further information, visit the ATO website.

As always, chat with your Accountant about which option is best when it comes to lodging your return this year.

If you’d like to have a chat with one of our Financial Advisors or Accounting team, book an appointment today.