ATO update: changes to working from home (WFH) deduction rules

There are currently two methods for calculating working from home deductions: the ‘actual’ and ‘fixed rate’ methods. The Australian Taxation Office (ATO) have announced major changes to the fixed rate method, which will affect the way deductions can be claimed within 2022/23 tax returns.  

So, what exactly are the changes?

Rate increase

The rate has increased from 52 cents per hour to 67 cents per hour.

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Items included

Previously, the fixed rate method did not included phone & internet usage as these items were able to be claimed separately (apportioned by the percentage of personal use versus work-related use).

Under the new flat rate of 67 cents, these items are automatically included – meaning that taxpayers will no longer need to determine the percentage of personal and work-related use for those items if using this method.

The remaining items which are not included in the new rate, and therefore can be claimed separately, include:

·        Decline in value of assets of assets used while working from home i.e., depreciation on computers, office furniture etc  

·        The repairs and maintenance of these assets

·        Costs associated with cleaning a dedicated home office

Record-keeping requirements

From 1^st March 2023, to claim the fixed rate method, records must be kept for every hour spent working from home. Taxpayers will no longer be able to use a representative record i.e. a four-week diary which is used to figure out the total amount of hours for the year.

The ATO have outlined that records must be kept as they occur, with acceptable forms including: timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.

For each expense incurred, a record will also need to kept on file ie. one phone bill, one electricity bill etc.

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Separate office space requirements

Previously, to claim the fixed rate taxpayers needed to have a separate space in the house setup as a home office. This requirement has now been removed by the ATO.  

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For further information, visit: https://www.ato.gov.au/Media-centre/Media-releases/ATO-announces-changes-to-working-from-home-deductions/