The ATO has announced changes to the way that taxpayers can claim working from home deductions from the 2022/2023 financial year. For the 2022 year, taxpayers had three options for claiming their home office expenses.

1. The Actual Cost Method where a percentage of your home office expenses (e.g. gas, electricity, internet, etc) were claimed based on the percentage of their usage that would relate to their employment.
2. The Fixed Rate Method where a flat rate of 52c for every hour you worked from home was claimed. The 52c was to cover the cost of gas, electricity, the decline in value of your home office furniture and furnishings (e.g. a desk). Items such as phone and internet and depreciation of assets other than your home office furniture and furnishings were able to be claimed in addition to this.
3. The Shortcut Method where your home office expenses were claimed at 80c for every hour you worked from home and no other home office expenses that you incurred (e.g. internet, phone, equipment, etc) were able to be claimed. This method was brought in during 2020 when more people began working from home as a result of Covid.

To claim any of these expenses, you needed to have a dedicated home office space to be eligible.

For the 2023 financial year, the shortcut method is no longer an option to claim your home office expenses and changes have been made to the fixed rate method.

From 1st July 2022, the fixed rate amount will increase from 52c per hour to 67c per hour. The increased rate will cover the costs for the following expenses: gas, electricity, both mobile and home phones, internet, stationery and computer consumables. Items that can be claimed in addition to the 67c per hour include: The decline in the value of assets used while working from home (e.g. computers and office furniture), the repairs and maintenance of these assets and cleaning costs that relate to cleaning of a dedicated home office space.

The other big change is that from 1st July 2022, taxpayers no longer need to have a dedicated home office space to be eligible to claim home office expenses.

“The shortcut method is no longer an option to claim your home office expenses...”

Record Keeping

To be able to substantiate these expenses, taxpayers will need to keep a record of all hours that they have worked from home for the entire year. These records can be provided in any form, provided they are kept at the time the hours are worked. For example, timesheets, rosters or diaries can be provided as evidence. Records must also be kept for each expense taxpayers have incurred that is covered by the fixed rate method (e.g. phone and electricity bills)

There are transitional arrangement in place for the 2023 year so if taxpayers have not kept a record of all of the hours they have worked from home during this financial year, the ATO will accept a record which represents the total hours you have worked from home between 1st July 2022 and 28th February 2023 (e.g. a four week diary). From 1st March 2023, taxpayers will need to keep a record of every hour worked from home if they want to claim their home office expenses.

If you have any questions about this or wish to discuss it further please contact us on 0434 084 635 or email us at amy@albaccounting.com.au.