Australians who still work from home are getting a new way to claim their tax deductions that should take some of the headache out of the process.
The Australian Taxation Office has introduced a more streamlined “fixed rate method” that encompasses a broader range of expenses — including energy bills, phone usage and internet — while increasing it from 52 cents to 67 cents per hour.
The changes comes after the popular “shortcut method”, first introduced during Covid, came to an end at the start of this financial year. It means taxpayers can now choose either the fixed rate method or the “actual cost method”, which is not changing, to claim their deductions for 2022-23.
“We really wanted to look at the fixed rate method, to modernise it to reflect hybrid working arrangements,” said ATO assistant commissioner Tim Loh. “We wanted to make things easy for people.”
In addition to a 28 per cent increase in the actual rate, the ATO has eliminated the requirement that people must have a dedicated home office to use the fixed rate method.
“Under this you can basically work at your kitchen bench or dining table, which reflects what people are doing,” Mr Loh said.
Nearly five million people claimed work-from-home deductions last year. In 2020-21 there were $4.14 billion worth of work-from-home deductions, at an average of around $830.
Mr Loh stressed that in order to claim working from home expenses, people must be fulfilling their employment duties, not just carrying out “minimal tasks” such as occasionally checking emails or taking calls.
“But for example if you’re working two days full time at home, that’s when this method can apply,” he said.
The ATO argues that the revised fixed rate method works out to a better deal for taxpayers, rolling together items that are “difficult and tedious” to calculate actual work use such as phone, internet and electricity expenses, as well as consumables like printer ink and stationery.
“That basically covers all of your expenses,” Mr Loh said.
No additional deduction for any expenses covered by the rate can be claimed if taxpayers use this method.
Separately, however, taxpayers can still claim for assets and equipment that typically give a bigger deduction such as computers and office furniture.
But Mr Loh stressed that regardless of the deduction, record-keeping was essential.
“I’m going to sound like a broken record, but the ATO is all about records,” he said.
“If you don’t have a record you can’t claim a deduction. Obviously there are plenty of options for keeping records but the ATO app is a great place.”
And he warned that taxpayers had previously been caught out trying to claim general household items as work-related expenses.
“Sometimes we saw in previous years people claiming internet expenses when they were just using to watch Netflix,” he said.
“Or your coffee, tea and Tim Tams — some people were even claiming dunny rolls.”
Such items can’t be claimed, even if they may be provided at work.
The revised fixed rate method applies from July 1, 2022, but taxpayers have been given a bit of lee-way.
At the urging of tax industry stakeholders, a transitional arrangement has been put in place meaning from July 1, 2022 to February 28, 2023, the ATO will accept a record which represents the total number of hours worked from home, such as a four-week diary.
But that means from the start of next month, taxpayers will need to record the total number of hours they work from home.
The actual cost method is more time-consuming, but allows taxpayers to claim the actual work-related portion of all running expenses.
It requires detailed records for all expenses being claimed, including all receipts, bills and other similar documents to show taxpayers have incurred the expenses, a record of the number of hours worked from home during the income year, and a record of how taxpayers have calculated the work-related and private portion of their expenses.
That could be a diary or similar document kept for a representative four-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop.
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