New ATO Work from Home Legislation Explained

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New ATO Work from Home Legislation Explained
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Working from home has become a new norm for many of us since the pandemic began. As a result, the Australian Taxation Office (ATO) introduced a Working from Home legislation to help individuals claim deductions for expenses incurred while working from home.

On 16 February 2023, the ATO revised the fixed rate method, which applies for the entire financial year starting from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022-23 income tax returns. Additionally, how you substantiate your claim has been updated and applies from 1 March 2023.

Exploring the Details of the Revised Fixed Rate

The revised fixed rate method allows you to claim 67 cents per hour if you work from anywhere in the home. The previous requirement for a designated workspace has been removed. The rate has increased; however, be aware of what is included and not included in the rate, as this has changed since last year.

Working-from-home expenses for the revised fixed rate method include:

    • Energy expenses (electricity and gas) for lighting, heating, cooling and running electronic items used for work.
    • Internet expenses
    • Mobile and home phone expenses
    • Stationery and computer consumables

Expenses that can be claimed separately from the revised fixed rate method include;

    • Laptop, computers and second screens (depreciation rules apply)
    • Desk, chairs and other office furniture (depreciation rules apply)
    • Office cleaning (you must have a separate workspace in your home and apportion the cleaning expense to your designated work area)

The Actual Expenses Method is still available; however, If you’ve been working from home since the pandemic began, you may have claimed the 80c Covid-19 working from home rate. This rate is no longer available as of 1 July 2022.

We recommend you speak to a tax professional to assess which method best supports your working-from-home expense claim.

Understanding the Criteria for Claimable Expenses

A deductible expense can be claimed as long as it was;  

    • A necessary expense for doing your job at home;
    • You paid for it, and
    • You kept a record that proves it 

To claim work-from-home expenses, the expense must have the following:

    • Been incurred whilst working from home as an employee or carrying on a business to gain or produce your assessable income
    • You must be out of pocket for the expense – either from your account or a joint account, and
    • You must be able to  prove the expense

Please note that expenses cannot be claimed if your employer has already reimbursed them; the ATO calls this ‘double-dipping’.

If your employer provides you with an allowance for working from home, this is included as assessable income, and you can offset this income by claiming the relevant working-from-home expenses you’re incurred.

To download the quick look factsheet provided by the ATO click below

The fine line: Understanding Non-Deductible Expenses

You cannot claim a deduction for the following expenses:

    • Coffee, biscuits, toilet paper, music etc. Even if your employer usually provides these items in the office
    • Costs that relate to your children’s education, such as; iPads, desks, subscriptions for online learning
    • Occupancy expenses include; Rent, mortgage interest, council and water rates, and house insurance

Claiming the Revised Fixed Rate: What you need to think about

You must keep detailed records of all expenses incurred while working from home, including the actual hours you worked from home from 1st March 2023- 30 June 2023 and your 1 month of representative evidence of hours worked from home from 1 July 2022- 28 Feb 2023.  You are required to have evidence that you’ve paid for the costs covered (e.g. electricity bill, mobile phone bill, internet bill, receipts and invoices). If these expenses are not in your name personally you must be able to prove it was paid from a joint account or credit card.

Keeping accurate records is vital to ensure you claim the correct deductions and avoid any issues with the ATO. We recommend speaking to a tax professional to assess the expenses you can claim to support your tax return best.

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