Working from home? ATO changes the fixed rate method of claiming a deduction for home office expenses.

As seen in Woopi News April 2023

Many taxpayers are familiar with claiming their working from home (WFH) expenses, especially during the pandemic period. WFH expenses can be claimed using one of two methods, the actual cost method or the fixed rate method. The ATO has announced changes to the fixed rate method for the 2022/23 income year onwards to a 67c an hour rate which replaces the previous 52c hybrid method rate and the 80c pandemic shortcut rate. Along with the change in rate, there have also been changes to the substantiation requirements and a need for tighter record-keeping.

The new rate covers energy expenses, phone, internet, stationery and computer consumables. Items that can be claimed separately in addition to the fixed rate include depreciation of assets such as computers and office furniture and repairs and maintenance of these assets. Any additional claims will require a tax invoice or receipt to substantiate these costs.

Up to 28 February 2023 the ATO will accept a record that represents the hours worked from home. From 1 March 2023, actual records of all of the hours worked from home will need to be kept, an estimate will not be accepted. Taxpayers should keep records as they occur such as timesheets, rosters, logs of time or a diary for the full year. Depreciation records will also need a four-week usage record for the relevant equipment used (laptop, printer etc). Evidence of expenses claimed using the fixed rate are now needed such as a phone, internet or electricity bill, as those living with relatives or in share accommodation may not be entitled to use this method if bills are not in their name. A deduction can’t be claimed if there has been any reimbursement from an employer.

The revised rate no longer requires a dedicated home office space to claim WFH expenses. Business that operate some or all of their business from home can also use the revised rate to claim home-based business expenses.