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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.
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.
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.
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
Calculating Running Expenses
Fixed Rate
The changes are:
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:
This method generally leads to bigger claim than the fixed rate but is more complicated and more substantiation is required.
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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.
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