It is now harder to claim Home Office Expenses
The ATO has issued a new, less generous method for calculating home office expenses and also introduced increased record keeping requirements. The new record keeping requirements apply from 1 January 2023 and the new home office deduction rate applies from 1 July 2022.
Prior to the change, taxpayers could elect to use:
- “Default method”which allows a $0.52 claim per hour of work from home. Additional expenses can then be claimed for their associated home office usage.
- “Shortcut method”which allows a $0.80 claim per hour of work from home. This rate is inclusive of related home office expenses. This includes internet, phone, depreciation, stationery and more. This rate was introduced by the ATO during the COVID-19 period where an increasing number of taxpayers began working from home.
These two methods are now being scrapped by the ATO and are to be replaced by a new method, with a few new rules.
From the 1st of July 2022, taxpayers can claim a $0.67 rate per hour worked from home:
- The $0.67 per hour method is inclusive of internet, phone, electricity, gas and stationery.
- Depreciation, cleaning and running costs can still be claimed at their usual rate.
- The number of hours work from home must be clearly documented. This can include a journal of worked hours, or evidence provided from a work calendar.
- The reliance of an estimate will no longer be accepted
- The taxpayer must be able to clearly show that they incurred some running costs while working from home. This means that receipts, invoices and the like must be provided as proof.
Record keeping is being stressed as a vital requirement by the ATO in order for a valid work from home deduction. What does this mean?
What if I use my phone and internet but am not working from home? Can I claim these expenses separately?
- A claim of $50 for internet can be made without any substantiation requirements.
- A claim of $50 for phone can be made without any substantiation requirements.
- Most people pay for their calls and data in one amount per month. This makes it difficult to differentiate between amounts that are used for either: 1) private purposes 2) work from home purposes 3) work-related purposes. Under these circumstances it becomes complicated to substantiate a claim (greater than the $50 mentioned above.)
If you would like further clarification on the change, or have any other questions you would like answered in relation to tax or accounting, please don’t hesitate to get into contact with us at DW Johns & Co Chartered Accountants.
