News Articles
On 16 February 2023, the ATO announced changes to working from home (WFH) deductions.
Taxpayers can choose either the ‘actual cost’ or the ‘fixed rate’ method to claim WFH deductions. Only the fixed rate method is changing. The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022–23 income tax returns.
From 1 July 2022 to 28 February 2023, the ATO will accept a record representing an estimate of the total number of hours worked from home (such as a 4-week diary). From 1 March 2023 onwards, taxpayers must keep records of the total number of hours they actually work from home.
Tax deductions for working from home (WFH)
As a result of the COVID-19 pandemic many people have been and still working from home. This means an increase in their utility costs, phone and internet expenses as well as the use of personal equipment. If this applies to you, the good news is that some of these expenses can be claimed back as a tax deduction on your next tax return.
Home office running expenses
Usually when working out home office deductions, the ATO requires a 4-week consecutive diary listing the number of hours you work from home per week and then averaging that out for the rest of the year. However, if there is a period where your working from home time has significantly increases, keep a separate diary to detail your costs relating to this period to justify your larger claim and do not average this cost out throughout the year.
Capital Gains Tax (CGT) implications
In most cases, if you work from home as an employee and claim working-from-home expenses, it will not have CGT implications and you will not lose your main residence CGT exemption. If you do claim occupancy expenses, i.e. lighting, heating and cooling bills, then you do not get the full main residency CGT exemption, although you may be entitled to a partial exemption.
Below provides detail around what you can and cannot claim. We also show you the details on calculating running expenses:
Your home office
Can Claim
- Phone and internet expenses.
- Small capital items such as furniture and computer equipment costing less than $300.
- Depreciation of equipment, furniture and furnishings in the area you use for work.
- The cost of repairs to this equipment, furniture and furnishing.
- Cost of cleaning your home work area.
- Lighting, heating and cooling bills.
- Other running expenses, including computer consumables (such as printer ink and stationery).
Calculating Running Expenses
Fixed Rate
The changes are:
- The cents per work hour have increased from 52 cents to 67 cents and it covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables.
- Expenses that can be claimed separately:
- Depreciation of equipment used while WFH.
- The repairs and maintenance of these assets.
- The costs associated with cleaning a dedicated home office.
- Taxpayers are not required to have a dedicated home office to claim WFH expenses under this method.
- Taxpayers need to keep a record of all the hours worked from home for the entire income year. The ATO will not accept estimates, or a 4-week representative diary or similar document, under this method from 1 March 2023.
- Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.
- Records must be kept for each expense that taxpayers have incurred which is covered by the fixed rate per hour.
Actual Expenses
If you have a dedicated work area, you can claim additional running costs and the depreciation of office furniture used in the area for work purposes. To calculate actual expenses for your dedicated work area you need to:
- keep a record of the number of actual hours you work from home during the income year,
- work out depreciation of assets based on work-related use percentage,
- work out cleaning expenses based on floor area percentage of your dedicated work area, and
- work out cost of heating, cooling and lighting on cost per unit of power used and average units used per hour for work-related purposes.
This method generally leads to bigger claim than the fixed rate but is more complicated and more substantiation is required.
Discuss Further?
If you would like to discuss, please get in touch.
Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
Quick Links
Acknowledgement of Country
We acknowledge the Traditional Owners of the land where we work and live. We pay our respects to Elders past, present and emerging. We celebrate the stories, culture and traditions of Aboriginal and Torres Strait Islander Elders of all communities who also work and live on this land.
Let's chat.
For a no obligation meeting about our many services, please use this form to submit your enquiry.
We will respond to you as soon as possible.
Footer Enquiry Form
Our Location
255 Port Road
HINDMARSH SA 5007
PO Box 338
Welland SA 5007
"We feel confident in our financial decisions and can focus on growing our business with peace of mind."
John & Barbara Kalleske
Kalleske Vineyards Pty Ltd
