Changes to ‘Working from Home Office Deductions’ – get informed!
Our Accountant Jake Millard breaks down the changes below, so you’re well prepared for tax time!
The landscape of claiming home office deductions has now changed for the 2023 financial year and action will need to be taken as soon as possible to be fully prepared for your next tax return.
Previously, we were able to choose from three different working from home office methods when claiming your working from home tax deductions.
We could either claim:
- Actual Costs Method
- 52 cents per hour rate
- 80 cents per hour rate
Actual costs method
In order to claim the actual cost method, you must have had a dedicated working space that is not shared with other members of your household during working hours. Expenses that can be claimed using this method include the following:
- the decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops, or similar devices.
- electricity and gas (energy expenses) for heating, cooling and lighting.
- home and mobile phone, data and internet expenses.
- stationery and computer consumables, such as printer ink and paper.
- cleaning your dedicated home office.
Where you incur running expenses for both private and work purposes, you need to apportion your deduction for the total space used as ‘a home office’ compared to the size of your residence. You can only claim the work-related portion as a deduction.
52 Cents per hour rate
The 52 cents per hour rate was the standard home office fixed rate method for 2022 and covered the following expenses:
- The decline in value of home office furniture and furnishings.
- Electricity and gas (energy expense) for heating, cooling and lighting.
- Cleaning your dedicated home office.
On top of these items, you could also claim work-related phone, data and internet expenses, printing and stationery costs and the decline in value of depreciating assets excluding office furniture separately. This method also required you to have a dedicated working from home space in order to be eligible.
80 cents per hour rate
The 80 cent “shortcut method” was a temporary measure brought in during March 2020 to make claims simpler for taxpayers with the rise in taxpayers working from home due to COVID. This rate covered the following expenses:
- Phone and data expenses.
- Internet expenses.
- The decline in value of equipment and furniture.
- Electricity and gas (energy expense) for heating, cooling and lighting.
The change – 67 cents replaces the 52 and 80 cent per hour rate options
As of the 2023 financial year, while you are still able to claim the Actual Costs Method, a new 67 cent per hour rate has been introduced to replace the 52 and 80 cents per hour rate methods.
This new rate covers the following expenses:
- Home and mobile internet and data expenses.
- Mobile and home phone usage expenses.
- Electricity and gas (energy expenses) for heating, cooling and lighting.
- Stationery and computer consumables.
The rules above no longer require a dedicated working from home space and now also allow the depreciation of home office furniture such as desks and chairs to be claimed as a separate expense along with any technology such as laptops or tablets, with all items under $300 being able to be claimed in full in the 2023 financial year.
More detailed records will be required
The new 67 cent per hour rate will also require more detailed records for your home office claims than required in previous financial years. Previously you only needed to provide a representation of the home office hours worked, such as a 4-week diary of your hours worked from home, however, starting from the 1st of March 2023 you will be required to provide a detailed record of all hours worked from home during the period starting 01/03/2023 to 30/06/2023, and for the entire year for subsequent financial years. You will also be required to provide at least one bill for the expenses incurred while working from home such as your phone, internet and electricity and gas during the financial year. For the 01/07/2022 through to the 28/02/2023 a representation of the hours worked from home will suffice as evidence.
If there are any questions regarding any of the working from home office deduction changes above, please contact your Highview Accountant and they will be happy to assist you.
Jake Millard
Accountant CPA
Highview Accounting & Financial, Prahran
Source: www.ato.gov.au