The Australian Tax Office (ATO) has announced revised rules for claiming a tax deduction when working from home.
This is in response to the growing number of people now working remotely due to the COVID-19 pandemic. The ATO’s updated regulations help make claiming a tax deduction simpler and easier, while ensuring that only genuine deductions are claimed. In this article we explain the details of the new rules, who is eligible for the deductions, what types of expenses are deductible and how to correctly record them on your tax return.
What are the ATO’s Key changes to the Work from home deduction rules?
- Changes are effective from the 1 March 2023;
- Rate has changed from the Covid-19 rate of .80c per hour to 0.67c per hour;
- Detailed records must be kept by the Taxpayer of time spent working from home, no estimates will be accepted;
- Details of expenses incurred must also be kept by the Taxpayer
The Australian Taxation Office are:
- Now allowing taxpayers to claim a deduction for expenses incurred while working from home, regardless of whether their employer reimburses them or not. This includes costs such as electricity, internet, and phone bills.
- No longer requiring taxpayers to have a dedicated workspace in their home in order to claim the deduction. This means that even if you’re working from your kitchen table or living room couch, you can still claim a deduction for your home office expenses.
- Advising taxpayers that they can only claim deductions for the portion of their expenses that relate directly to their work activity.
How do the revised rules affect taxpayers?
- In order to claim the deduction, taxpayers must have incurred the expenses themselves and must not have been reimbursed by their employer.
- The deductions are calculated on a per-room basis, so taxpayers can only claim for the rooms in their home that are used for work purposes.
- The ATO has also clarified that taxpayers can only claim the deduction for periods when they are actually working from home – so it is not available for those who occasionally work from home or who use their home as a base while travelling for work.
- Taxpayers must record every hour they work from home. They should keep records “as they occur” as “timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year”.
- The ATO won’t accept estimates or a four-week representative diary or similar document under this method from 1 March 2023.
What deductions are available under the revised rules?
There are a few deductions you can now make for working from home, including:
- A portion of your internet costs
2. A portion of your phone costs
3. The running costs of any equipment you use for work, like a printer
4. The cost of any office furniture or supplies you need to do your job
5. If you have a dedicated home office space, you can claim a proportion of the costs of running your home, like heating and electricity
How to claim the deductions?
- In order to claim the deduction, taxpayers must have incurred the expenses themselves and must not have been reimbursed by their employer;
- The expense must be 100% related to earning your income;
- You must have records to prove it
Once you have all of the necessary documentation, you can claim the deduction on your annual return by advising your Accountant when they prepare your return or by contacting the Australian Taxation Office.
These revised rules make it easier for taxpayers to claim deductions for working from home expenses, and will likely result in more people taking advantage of this tax break. If you’re planning on claiming deductions for working from home expenses this year, be sure to keep track of all your receipts and records so that you can substantiate your claims come tax time.
Working from home is becoming increasingly popular and the ATO’s revised rules make it easier for those working from home to claim deductions. By understanding these rules, you can ensure that your taxes are accurate and that you get the full benefit of the new deductions. Investing in quality office equipment such as a desk or a chair may also help with improving productivity while working remotely. With this knowledge, everyone can work smarter and enjoy the benefits of both comfort and convenience when they work from home.
Should you have any questions or would like to discuss this article further, the team at Gerard Wilkes & Associates are here to help. Do not hesitate to contact us at https://www.wilkes.com.au/contact-us/ or call our office 07 5532 1733.