On the 3rd of November 2022, the Australian Tax Office announced some changes to the working-from-home expense methods for the 2022-23 financial year. These changes are aimed at providing more certainty to employees who are currently working remotely, as well as making it easier for employers to claim eligible expenses.
The initial draft of the practical compliance guideline provides a new method, which is known as the revised fixed rate method. This is what the ATO proposes to be used to claim tax deductions for working-from-home expenses for the financial year 2022-23.
As such, there are some changes, which we expect to see and we want to explore what this means for those working from home as well as the employers.
It is worth noting that this is a draft and as such, there may be changes in the final document.
An Overview of Key Proposals Made
One of the key changes that have been proposed by the ATO is the introduction of a fixed rate of 67 cents per hour. This applies to employees who are currently working from home. This rate seeks to replace the shortcut method which was previously used.
In essence, with this new rate of $0.67, there are notable changes to what can be claimed and requires extra record keeping. This, therefore, means that you will not use the 52 cents method in the coming financial year as it has been revised.
In addition, the shortcut method of 80 cents per hour will also be discontinued and as such, the proposal is to have the work-from-home deductions calculated at the revised rate.
What Does the New Revised Fixed Rate Method Mean?
As stated, the ATO has proposed a new revised fixed rate of $0.67 per hour, which will be used for calculating tax deductions.
Some of the expenses that are covered include:
- Mobile and home phone expenses
- Gas and electricity costs
- Internet and broadband expenses
- Purchase or upkeep of necessary home office items such as stationery, computers and printers
Essentially, this new rate has been set to cover the additional running costs that an employee incurs while they are working from home. This is seen as a way of providing more certainty for employees who are currently working from home.
It is important to note that you cannot qualify to make a separate deduction for expenses that you have included in this new revised method. However, there are some other deductions that you can make separately including:
- Depreciation of value of assets while working from home like office furniture
- Cost of repairs and maintenance of such assets
- Other expenses that are not included in the fixed-rate deduction
Crucial Records to Keep for Work-from-Home Expenses
The ATO has put an emphasis on records for those who wish to make tax deduction claims.
Henceforth, you will be required to provide:
- A record capturing all the hours that you have worked from home in the given financial year. This should be in the form of a roster, timesheet or diary
- Proof of payment for the expenses that need to be covered by the revised rate method. For instance, if you use the internet for home use and work purposes, have separate bills for the two
The new revised fixed rate method allows you to claim deductions at a rate of 67 cents per hour. You can make claim for expenses incurred working from home and the only separate deduction will be the decline in the value of assets. Records are crucial as well as proof of payment of the expenses.
Talk to us today to learn more about these newly proposed changes to working-from-home expense deductions.