Your guide to the ATO’s new work-from-home deduction changes
The ATO scrapped the so called ‘shortcut method’ of claiming work from home expenses at the end of the 2022 financial year on 30 June 2022. This method allowed taxpayers to claim 80 cents per hour worked from home and was an all-inclusive rate so no other work from home related expenses could be claimed on top.
In its absence, the ATO has now introduced an updated fixed rate method which has gone up from 52 cents to 67 cents, kicking off from March 2023. This rate will now cover all ongoing expenses such as phone bills, internet and utility expenses while working from home.
What's changed?
Additional expenses such as new equipment, office furniture and cleaning the at-home office space can all be claimed separately on top of the 67 cents per hour.
A further update from the ATO states that taxpayers will no longer need a dedicated office space at home, meaning anyone using a shares space at home for work, such as kitchen table, bedroom, living room, etc, can also utilise this method.
However, the changes don’t stop there, the ATO has also introduced stronger record keeping for at home expenses. From 1 July 2022 to 28 February 2023 taxpayers can provide a four-week diary representing their hours worked from home. From March 2023 onwards, the ATO will require each hour worked from home to be recorded. The ATO also requires taxpayers using this method to keep their utility bills covering the expenses incurred for the home office.
Do these changes affect the actual-cost method?
These changes only apply to the fixed rate method, the actual cost method of calculating work from home expenses will remain unchanged. The actual cost method takes all of the at home expenses and then proportions them for their work-related use.
Anyone utilising this actual cost method can submit either a detailed hour-by-hour record, or a 4 week diary representative for the entire year if their work-from-home pattern is consistent.
A Break down on the changes
The table below gives a snapshot of the changes made by the ATO to the fixed rate method of home office deductions:
| Rate | 52 cents (Old) | 67 cents (New) |
|---|---|---|
| What’s covered by the rate | Energy expenses (electricity and gas) | • Energy expenses (electricity and gas) • Phone usage (mobile and home) • Internet • Stationery • Computer consumables |
| What can be claimed separately | • Phone usage • Internet • Stationery • Computer consumables • Decline in value of assets (computers, furniture) • Repairs and maintenance of assets • Cleaning costs of home office | • Decline in value of assets (computers, furniture) • Repairs and maintenance of assets • Cleaning costs of home office |
| Home office space | Dedicated home office space | No dedicated space required |
Please reach out to Link Advisors for more information on what’s required to claim home office expenses and your eligibility to maximise your return.