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Recent Changes to Working from Home Deductions

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As the new financial year begins, we wanted to draw your attention to the recent changes the ATO has made to the way taxpayers claim deductions for costs incurred when working from home for the 2023 financial year and beyond.

For business owners and employees alike, it’s important to think about the more stringent record-keeping requirements going forward, to ensure you are optimising your deductible expenses that you may be able to claim when working from home.

 

Who Can Claim Home Office Expenses?

As has always been the case, to claim working from home expenses, you as an employee (be it the self-employed business owner, or otherwise) must:

      • be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls.

      • incur additional running expenses as a result of working from home.

      • have records that show you incur these expenses.

    The ATO have 2 methods available to calculate your claim, revised fixed rate method or the actual cost method.

    The revised fixed rate method is the most commonly used due to the less onerous record-keeping requirements, whilst also limiting future negative tax consequences (like voiding your main residence exemption on your home!). 

     

    Revised Fixed Rate Method – Change to the Deduction Rate

    In a nutshell, the fixed rate method has allowed taxpayers to claim a deduction for running expenses on and hourly basis. The rate has changed over the years in line with inflation, was temporarily increased over covid, and now from 1 July 2023 sits at 67 cents per hour (up from 52 cents).

    The increase sounds great but before 1 July 2023, in addition to the hourly rate, you could claim extra on top for telephone, internet, stationery etc. Not anymore!

    The new rate now includes all of the following:

        • data and internet.

        • mobile and home phone usage.

        • electricity and gas.

        • computer consumables (e.g. printer ink).

        • Stationery.

      You can claim a separate deduction for the decline in value of assets used while working from home, such as computers and office furniture and the repairs and maintenance of these assets. You can claim for cleaning, only if you have a dedicated home office.

       

      Revised Fixed Rate Method – Changes to the Records You Need to Keep

      Whilst we appreciate any steps taken to simplify the tax system, changes to record-keeping requirements going forward are now more onerous, if you intend on claiming home office expenses going forward……

      Where previously you could rely on an estimate of the number of hours you worked in your home office, the ATO now required that a timesheet, roster, diary, or similar document to be kept specifying the time workers commence and finish work (including breaks).  

      Having a workbook or timesheet on your laptop or at your home office desk is thereby becoming a necessity, as it could be called upon by the ATO as evidence for future home office deductions.

      If interested in knowing more, See the ATO guide.

       

      ATO Home Office Actual Cost Method – No changes

      It’s worth noting that there have been no changes to the actual cost method, where you claim for the actual expenses incurred by working from home, rather than an estimated hourly rate. As above, this method is less commonly utilised, however we do assess its applicability on an annual basis for you.

      Your Traction team are always ready to assist, should you have any queries in relation to claiming home office expenses, so please feel free to reach out.

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