The Australian Taxation Office (ATO) has “refreshed” the way taxpayers who work from home can claim deductions, and it involves some serious record-keeping for a potentially smaller return.
It says the revised method will come into effect for 2022-23 income tax returns, but applies retrospectively to any claims from July 2022 onwards.
There are two claiming methods for taxpayers working from home, the “actual cost” method and the “fixed rate” method — only the fixed rate method is changing.
The fixed rate method allows taxpayers to claim a percentage of each dollar they have earned while working at home.
It also formerly allowed taxpayers to claim additional expenses like stationery and mobile phone or energy expenses. This is no longer the case.
Under the revised method, the percentage taxpayers can claim will increase from 52 cents to 67 cents, but that will include all of those other expenses which could have previously been claimed as additional expenses.
This is different again from the temporary “shortcut method” which was available to taxpayers last financial year, allowing them to claim 80 cents to the dollar.
H&R Block tax communications director Mark Chapman told 7NEWS.com.au in a statement that this new 67 cent method might mean the average taxpayer could lose about $629 in their future tax returns.
“(The) typical individual stands to lose out on deductions using this new method,” Chapman said.
The typical Australian taxpayer working from home “would have been able to claim $1379 under the old regime,” but under the new method they stand to claim deductions around $750, Chapman said.
He said this is “mainly because mobile phones are included in the new fixed rate but excluded – and thus claimable separately – using the old 52 cents rate.”
ATO assistant commissioner Tim Loh said on Thursday that the changes ”better reflect contemporary working from home arrangements”.
The ATO does not require taxpayers to have a dedicated home office to claim working from home expenses, ATO reports.
How to claim under the new fixed rate method
There are a couple of other things to be aware of under the revised fixed rate method – record keeping and “double dipping”.
One of the major changes is the amount of record keeping that is required of taxpayers wishing to claim under the revised method.
“Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document,” the ATO said
Timesheets, rosters, a diary for the full year, or time logs that prove the hours spent accessing employer or business systems are all acceptable forms of record keeping.
“Records of hours worked from home can be in any form provided they are kept as they occur,” the ATO said.
One bill for each expense included under the new rate, such as phone bills or electricity bills, must also be kept.
If taxpayers are using the fixed rate method they must not additionally deduct any of the below expenses already covered by the rate.
“If (taxpayers) use their personal mobile phone for work purposes and choose to claim the 67 cents per hour fixed rate, they cannot then claim a separate deduction for their mobile phone,” Chapman said.
“This was not the case under the old 52 cents rate, where mobile phones were excluded. Taxpayers may not understand this – and may try to claim both – leaving them open to audit.”
What’s covered by the new 67 cent rate
- Energy expenses (electricity and gas
- Phone usage (mobile and home)
- Computer consumables
What can be claimed separately
The following deductions can be claimed in addition as they are not included in the new 67 cent rate.
- The decline in value of assets used while working from home, such as computers and office furniture.
- The repairs and maintenance of these assets.
- The costs associated with cleaning a dedicated home office
“And remember, you can’t claim for things like coffee, tea, milk and other general household items, even if your employer may provide these kinds of things for you at work,” Loh said.
The actual cost method
The actual cost method has not changed, and remains a method that involves even more stringent record keeping.
All receipts, bills and other documents which prove the claimed expenses incurred while working from home, must be kept.
A record should also be kept that shows the hours worked from home, either the actual hours or a diary/document which shows a representative four-week period of the taxpayers usual working from home pattern.
Taxpayers will also need to keep a record of how they have calculated and separated their work-related expenses from their personal expenses, which will also be used to determine the depreciation of assets.
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