Working from Home – Tax Deductions
On 16 February 2023, the ATO released Practical Compliance Guideline PCG 2023/1 outlining the requirements that need to be met in order to claim a deduction for working from home. There are some changes with regards to the amount that can be claimed and the records that you need to keep. These changes will apply to deductions claimed for the 2022-23 financial year onwards.
What do you need to know?
From 1 July 2022, the Revised Fixed-Rate Method allows you to claim a deduction of $0.67 per hour for the time you have worked from home (this will not cover depreciation, which can be claimed separately).
If you want to claim a deduction for working from home anytime after 1 July 2022, you will need the following:
- A record of the hours you have worked from home:
- Between 1 July 2022 and 28 February 2023, you will need a record that is a representation of the total hours worked from home.
- From 1 March 2023, you will need an exact record of the number of hours you worked from home – eg. timesheet, roster, diary, time-tracking app records.
- Evidence of the additional costs you have incurred as a result of working from home (eg. electricity bills, telephone bills, internet bills).
- Invoices for any office furniture or plant and equipment purchased.
- A 4 week diary showing the personal and income-producing use of any office furniture or plant and equipment purchased.
We will be requesting the above information when preparing your 2023 tax return. Without this information, we will not be able to claim a deduction for working from home.
PCG 2023/1 in Detail
2022 Financial Year and Earlier
If you are claiming a deduction for working from home prior to 1 July 2022, you can choose to use one of the following methods:
- The Temporary Shortcut Method – available from 1 March 2020 to 30 June 2022 (a flat rate of $0.80 per hour during COVID to cover electricity, internet, mobile and home phone, stationery and computer consumables, depreciation of home office furniture and equipment, cleaning)
- The Fixed-Rate method – available from 1 July 1998 to 30 June 2022 (a flat rate of $0.52 per hour to cover electricity, depreciation of office furniture, cleaning)
- The Actual Expenses Method – this is a claim for the actual expenses incurred as a result of working from home.
From 1 July 2022
From 1 July 2022, you can claim a deduction for working from home using either of the following methods:
- Revised Fixed-Rate Method – available from 1 July 2022 (a flat rate of $0.67 per hour to cover electricity, internet, mobile and home phone, stationery and computer consumables)
- Actual Expenses Method – as noted above, this is a claim for the actual expenses incurred as a result of working from home.
Revised Fixed-Rate Method
To claim a deduction using the Revised Fixed-Rate Method, you need to satisfy three criteria:
- You must be working from home (minimal tasks such as checking emails and taking some calls at home will not qualify)
- You must incur additional running costs (you must incur the costs and not be reimbursed these from your employer)
- You must keep and retain the relevant records.
Record of Hours Worked
For the 2023-24 and later income years, you must keep a record for the entire year of the number of hours that you worked from home. An estimate is not acceptable.
A record of your hours can be kept in any form. For example, it may be one of the following:
- Logs of time spent accessing employer systems or online business systems
- Time-tracking apps
- A diary
For the 2022-23 income year, you only need to keep a record which is representative of the total hours worked from 1 July 2022 to 28 February 2022 and then a record of the actual hours worked from 1 March 2023 to 30 June 2023.
Documents for Costs
For electricity, mobile and home phone and internet expenses, you must keep one monthly or quarterly bill as evidence of the additional running expenses you have incurred. For stationery and computer consumables, you must keep a receipt for the item purchased.
If you do not keep a record of the total hours you worked from home and evidence of the running costs incurred, you cannot use the revised fixed-rate method for claiming a deduction for working from home during the 2023 (and later) financial years.
The revised fixed rate method covers your costs for electricity, internet, mobile and home telephone and stationery and computer consumables. This means you cannot claim a separate deduction for these items. It does not cover depreciation for home office furniture or equipment (for which you can claim a separate deduction).
To claim a deduction for depreciation of your home office furniture or equipment, you must keep a purchase invoice which shows:
- the name or business name of the supplier;
- the cost of the asset to you;
- the nature of the asset;
- the day you acquired it; and
- the day the record was made out.
You must also keep records which demonstrate your work-related use of the asset. This can be evidenced by a 4-week period showing the personal use and income-producing use of the asset.
Home Office Occupancy Costs (rent, mortgage interest, rates, land tax)
We note that the above only relates to deductions for home office running costs. It does not provide guidelines for home office occupancy costs (like rent, mortgage interest, property insurance and land tax). More information is provided here in relation to home occupancy costs.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.
Jeanette has over 20 years experience as an accountant in public practice. She is a Chartered Accountant, registered tax agent and accredited SMSF Association advisor. When she is not helping business owners grow their empires, you will likely find her out running on the trails or lifting weights in her local CrossFit gym. Book in to see Jeanette today.