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Changes to working from home deductions

For the 2023 income year, there are again two methods that can be applied when calculating working from home deduction, the "actual cost" or the "fixed rate" method. The fixed rate method has been modified for the 2023 income year with an increase in the original cents per hour worked from 52 cents to 67 cents. As a result, a taxpayer may be eligible to claim a tax deduction of 67 cents for every hour they worked from home in the income year starting 1 July 2022.

Additionally, the shortcut method which applied an 80 cents per work hour that was introduced during 2020 in light of COVID-19 has since ended.

There have been no changes to the application of the actual cost method.

The revised fixed rate method encompasses items that can be onerous to track on a work vs personal use basis. Such items include phone, internet, electricity and gas expenses, and stationery and computer consumables. Conversely, office equipment that usually yield larger deductions for taxpayers, such as the decline in value of technological devices and office furniture, are not covered by the revised rate and must be claimed separately.

Another advantage applicable for the 2023 income year is taxpayers are no longer obligated to maintain a dedicated home office space to be eligible for the fixed rate method, however the hours work from home must be able to be substantiated.

Record keeping

From 1 July 2022 to 28 February 2023, the ATO will accept records indicating the total number of hours worked from home (e.g., a 4-week diary). Starting from 1 March 2023, taxpayers will need to document the total hours worked from home. Such evidence could be provided through timesheet entries, rosters, or other logs indicating hours spent accessing employer or business systems from home. Additionally, records of the expenses incurred must be kept and substantiated if required. For example a phone bill, or an electricity bill.

If you would like to discuss how these rules may apply to you, please get in touch with us today.



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