The ATO announced a major change in the methodology of supporting claims for working-from-home deductions with immediate effect.
The arrival of the COVID virus resulted in the need for many taxpayers to work from home without an option. The government swiftly legislated a ruling to provide the ATO and taxpayers with a simplified method of quantifying a deduction to cover the additional costs of working from home and was in place for 2020, 2021 and 2022 Tax years. The COVID pandemic is now on the decline, and the ATO is phasing out the current deduction method and replacing it with more sustainable methods.
There are two methods – the Fixed Rate Method and the Actual Cost method. Most taxpayers use the Fixed-rate method and there are substantial changes to record-keeping and to what is covered by the rate. These changes are summarised below:
Fixed-Rate
- The rate has increased from $0.52 to $0.67 per hour.
- This rate covers expenses like Internet, Mobile and Home Phone costs, electricity and gas, computer consumables (including ink) and stationery.
- You may not claim these expenses on top of the Fixed rate.
- You must provide a bill showing the average monthly cost of these expenses.
- You will still be able to claim for repairs and maintenance of work-related assets, as well as depreciation on these work-related assets. You must keep copies of the invoices and determine what the business/personal usage is for these assets.
- For the period July 2022 to 28 February 2023 the ATO will accept a reasonable record of hours worked from home such as a diary (for at least 4 weeks) during this period.
- From 1 March 2023 onwards you will need to keep a detailed record of hours per day worked for the entire period – you will no longer be able to estimate the hours worked each week.
The actual cost method is more detailed and will require materially more reporting and calculations. The ATO has indicated that there will be a strong focus on these deductions going forward.
If you need further clarity on this change, please contact your Account Manager who will provide you with some further guidance.
Find attached an information flyer from the ATO outlining Work from Home deductions or for a more detailed explanation, follow the link to the ATO website.