The ATO has updated the rules to better reflect contemporary working from home arrangements.
To claim your working from home expenses, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks like occasionally checking emails or taking calls. Also, you must incur additional expenses as a result of working from home.
You have the choice of two methods to claim your home office deductions: the “actual cost” method or the “fixed rate” method. Only the fixed rate method has changed.
The revised fixed rate method applies from 1 July 2022 and can be used when you are working out deductions for your 2022–23 income tax returns. The benefit of using this method is that it now includes difficult and tedious-to-calculate expenses like phone, internet, and electricity costs. If this rate is used, these costs can’t be claimed separately. The fixed rate for these expenses has increased from 52 cents to 67 cents per work hour. However, assets and equipment that give you a bigger deduction, such as technological items and office furniture, are not included in the revised rate and can be claimed separately. If you purchase assets and equipment for work and it costs more than $300, you can’t claim the full amount immediately. For each of these items, the deduction must be claimed over a number of years and the work portion claimed (known as decline in value or depreciation).
If you haven’t kept records so far this income year, transitional arrangements are in place for 2022-23. From 1 July 2022 to 28 February 2023, the ATO will accept a record that represents the total number of hours worked from home (for example, a 4 week diary). From 1 March 2023 onwards, you will need to record the total number of hours you work from home. These hours are to be recorded as they occur. Timesheets, rosters, time logs or a diary are all acceptable methods of recording your time spent working from home.
If you choose the actual cost method, you can claim the actual work-related portion of all running expenses. This includes keeping detailed records for all the working from home expenses being claimed, including receipts, bills, a record of time spent and other similar documents to show you have incurred the expenses.
Under the actual cost method you can calculate the actual cost for electricity and gas for heating cooling and lighting. But it is quite convoluted, as set out below:
Work out the cost of your electricity and gas (energy expenses) for heating, cooling and lighting by using the:
- cost per unit of power you use (your utility bill has this information)
- average units you use per hour, which is the power consumption per kilowatt hour for each appliance, equipment or light used
- total annual hours used for work-related purposes by checking your record of hours worked or your diary.
It’s important to keep records no matter which method you use.
We hope this article helps you to understand the changes and how they may impact your home office deductions. If you have any questions, please don’t hesitate to contact us.
