ATO Work From Home Deductions: The Changes and What You Need To Know

The number of people working from home in Australia increased from around 2 million before the pandemic to approximately 5 million over the past three years. With more people working from home, the Australian Taxation Office (ATO) has reviewed and revised the rules for claiming deductions on home office expenses.

Two Methods Available for Claiming ATO Work From Home Deductions

claim wfh tax deductions

According to Assistant Commissioner Tim Loh, taxpayers can now choose between two methods to claim working-from-home deductions: the “actual cost” or “fixed rate” method. 

Previously, several methods were available, including a fixed-rate method of 52¢ per hour, an actual cost method, and a shortcut method of 80¢ per hour, which was introduced during the pandemic and ended on 30 June 2021. Taxpayers can no longer use the shortcut method for this year’s tax return.

Revised Fixed-Rate Method and Its Benefits

The ATO review means that people working from home have a fixed rate of 67¢, but it will have limits on what can be claimed. The revised fixed-rate method includes phone and internet expenses as well as electricity and gas usage and stationery. However, taxpayers will need to claim the decline in the value of work-related equipment, such as office furniture, separately.

Mr Loh said these changes provide benefits for those using the revised fixed rate in 2022–23. 

“Items that are difficult and tedious for everyday Aussies to calculate actual work-use, like phone, internet and electricity expenses, are included in the revised rate. Assets and equipment that typically give taxpayers a bigger deduction, such as technological items and office furniture, are not included in the revised rate and need to be claimed separately. Another benefit is that you no longer need a dedicated home office to use the fixed rate method.”

Eligibility Requirements for Claiming Working-From-Home Allowances

requirements for eligibility

People claiming WFH allowances must first make sure they are eligible. That means they must be working from home to fulfil employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls. They must also incur additional expenses as a result of working from home.

Transitional Arrangements

Mr Loh reassured taxpayers who haven’t kept records so far this income year that transitional arrangements are in place for 2022–23. 

“From 1 July 2022 to 28 February 2023, we’ll accept a record which represents the total number of hours worked from home (for example, a four-week diary). From 1 March 2023 onwards, taxpayers will need to record the total number of hours they work from home.”

ATO eases record-keeping for revised WFH deductions, says Assistant Commissioner

Assistant Commissioner Tim Loh of the Australian Taxation Office (ATO) said the ATO had eased record-keeping requirements for people claiming working-from-home (WFH) expenses, after receiving feedback from external stakeholders. 

Under the revised fixed-rate method that applies to the 2022-23 income tax returns, taxpayers have a fixed rate of 67¢ per hour, which includes phone and internet expenses, electricity and gas usage, and stationery, but not technological items and office furniture. 

organising records

The record-keeping requirements for WFH deductions will start on 1 March 2023, after taxpayers keep records of the total number of hours they worked from home.

According to Mr Loh, most people already keep good records of their WFH expenses, making the transition to the revised regime easier. The ATO has launched a comprehensive marketing campaign to communicate the changes to the broader community. 

The campaign includes educational information across the ATO’s social media channels, updated advice and guidance on the ato.gov.au website, and educational emails to taxpayers and tax agents.

The revised fixed-rate method would make things simpler for accountants, said Mr Loh, as it would reduce the need to work out the work-related proportion of some difficult expenses. The 67c rate would also be reviewed to keep it in line with rising costs. The ATO will continue to review the rate to ensure that it accurately reflects the quantity of expenses covered.

Bottomline

The COVID-19 pandemic has forced millions of Australians to work from home, leading to the Australian Taxation Office (ATO) reviewing and revising the rules for claiming deductions on home office expenses. Assistant Commissioner Tim Loh has announced that taxpayers can now choose between two methods to claim ATO work from home deductions: the “actual cost” or “fixed rate” method. 

Under the revised fixed-rate method, taxpayers have a fixed rate of 67¢ per hour, which includes phone and internet expenses, electricity and gas usage, and stationery, but not technological items and office furniture. 

Bloomwealth can help people understand the changes and how to maximise their deductions. We can help you take control of your financial future and fulfil your true potential. Get in touch with us to ensure you are equipped with everything you need to make informed financial planning decisions.

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