Today we wanted to touch base on the Working From Home deductions you can claim on your tax return, as there have been some changes for the 2022-23 income year from 1 March 2023.
There are two methods available to calculate working from home deductions – Fixed Rate & Actual Cost.
While the Actual Cost Method has not changed from previous years, the Fixed Rate Method has changed – see below.
Revised Fixed Rate Method:
- has increased from 52 cents to 67 cents per hour worked from home
- removes the requirement to have a dedicated home office space
- works out the claim for:
- electricity and gas
- phone and internet usage
- computer consumables
- allows taxpayers to separately claim the work-related portion of the decline in value of depreciating assets – such as office furniture and technology
The new, 67 cents per hour method, has just been announced by the Tax Office. Under this method you multiply the number of hours you worked at home by 67 cents.
Important – records you must keep
If you want to use the new 67 cents per hour method, 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.
If you have a business & operate from home:
If you have a business that operates from home, you are able to claim home based business expenses.
To claim your business expenses, you will need to have:
- from 1 July 2022 to 28 February 2023 – a record which is representative of the hours you worked from home
- from 1 March 2023 to 30 June 2023 – a record of the total number of hours you worked from home (such as a timesheet, roster or diary) as well as evidence you paid for each of the expenses you incurred that are covered by the fixed rate method (for example, a phone or electricity bill). You will also need records for any equipment you bought to work from home, like technology or furniture (which provides details of the supplier, cost, date acquired).
Actual cost method :
- the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet
- a continuous 4-week period that represents your usual pattern of working at home – for example, a diary.
- the additional running expenses you incurred while working from home, such as receipts, bills and other documents
- how you worked out the amount of your deduction.
To use the actual method means you keep all of the invoices/receipts in relation to running your home. You calculate your tax deduction as a portion of the total of the expenses – often based on floor area.
Under this method, you must have a part of your house set aside exclusively for your work. This method has not changed.
For more information on WFH deductions, click here to be re-directed to the ATO website.
If you have any questions, please feel free to give our office a call on 03 9762 7344.
The Team @ Knox Taxation and Business Advisory