Working From Home? Look at the new method of claiming deductions.

The Tax Office recently made an important change to the way many people will claim a tax deduction for working from home.

For the current year of income, and future years of income, there are now only two methods that can be used to claim working-from-home deductions. These are the actual expenses method and the new revised fixed-rate method (67 cents per hour method). The previously used 80 cents per hour and 52 cents per hour methods have been abolished.

The Actual Expenses Method:

The actual expenses method allows you to claim a proportion of the actual expenses that you incur in running your home. You must have a place in your home set aside exclusively for the purpose of your work. Usually, you claim a portion of the total running expenses based on the floor area of your home office as compared to the rest of the house.

This method HAS NOT changed, you still need to keep all of the invoices/receipts in relation to running your home.

The new revised fixed-rate method (67 cents per hour method):

If you don’t want to use the actual expenses method, you can use the new revised fixed-rate method. This enables you to claim for:

Energy expenses (electricity and gas); and
Internet expenses; and
Mobile and home phone expenses; and
Stationary and computer consumables.

You do not need to set aside a part of your house exclusively for work to use this method. Also, more than one person in the house can use this method.

I want to use the new 67 cent per hour method. What records do I need to keep?

From 1 March 2023, you are required to keep actual records of the hours you work at home.

So, for the tax year ending 30 June 2023, you need to keep:

A record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023; and
A record of the total number of actual hours you worked from home for the period 1 March 2023 to 30 June 2023. An estimate of the hours in this period will not be accepted by the ATO. You must keep a daily record of the hours worked.

Also, if you want to use the new 67 cents per hour method, you must keep at least one monthly or quarterly bill or other invoice to show that you actually incur expenses for energy, internet, phone, stationery and computer consumables. These records are not used to calculate your deduction. You retain the records to prove that you incur the expense. The Tax Office may ask you to produce these records.

Other info to keep in mind:

Invoice in one person’s name: If expenses are shared in a house and you want to use the revised fixed-rate method, but the invoice is in one person’s name, then you will have to prove you have incurred the expense (payment from joint bank account or a receipt given from one household member to another)

4 week log: Where you want to claim depreciation for an asset that you have purchased, the ATO requires you to keep a 4-week diary log of your use of the asset.

For example, you may have purchased a computer mainly for work. However, you also use it for entertainment purposes. The Tax Office requires you to keep a continuous 4-week log of the use of the computer for income producing purposes and other purposes.

If you have any questions about claiming a tax deduction for working from home, please contact our team. We are here to help:

(03) 9374 8400

enquiries@mksgroup.com.au