Changes to working-from-home deductions

Are you part of the growing contingent of Aussies working from home? 

As of 1st March 2023, the way you claim a working-from-home deduction on your tax return has changed. You can no longer provide a four-week diary representative of the year; you must now keep a log for the whole year of the hours you worked from home. 

Preparing your 2023 tax return. 

When making a working-from-home deduction on your tax return, you can either use the Revised Fixed Rate or Actual Cost method to calculate your expenses. 

Revised Fixed Rate 

Per the latest compliance changes by the ATO, the revised fixed rate is 67c per hour (from 52c previously). This means you can claim a 67c deduction for each hour you work from home. As the simpler, more convenient method, this is more commonly used. 

This flat rate includes expenses you incur as a direct result of working from home, such as your use of data, internet, mobile phone, energy, computer consumables and stationery. It does not include general household items, such as coffee, tea or milk, or items that your employer has paid or reimbursed you for. Unlike the old rules, you can no longer make a separate claim for expenses, such as energy or internet, but you may continue to claim for the depreciation of assets, repairs, maintenance and cleaning. 

As mentioned above, from March 1st you’ll need to keep a record of all the hours you work from home for the entire year via a diary, roster, timesheet or similar document. However, for the period between 1 July 2022 and 28 February 2023, the ATO will still accept a record that represents the total number of hours you worked from home, e.g., a four-week diary. You will also need to keep a record that you have paid for those expenses covered by the fixed rate, e.g., phone, internet and electricity bills. 

Actual Cost 

The actual cost method requires significantly more calculations and records, though it may be worthwhile if considerable expenses have been outlaid. Rather than a standard rate, you claim a deduction for the actual expenses you incurred as a result of working from home, such as data, internet, mobile usage, energy, computer consumables, stationery, as well as the depreciation of assets, maintenance, repairs and cleaning. 

For this method, you will need to keep detailed records of these costs, down to the price per unit of electricity and the average number of units used per hour. You will need to keep evidence of every expense you claim, i.e., receipts, bills or invoices each showing the supplier, amount, description and date paid. As you can see, this can be quite a bit more complicated and for the vast majority of people, the fixed rate is the preferred method. 

Need a hand with tax preparation? 

With a professional accountant, you’ll stay on top of industry changes and streamline your tax preparation. As well as saving you time and stress, Ascent Accounting can make sure you’re claiming all the tax deductions you’re entitled to. Contact us today and let our experienced team optimise your financial life.