The Australian Taxation Office (ATO) has announced that the claiming of expenses for working from home will change for the 2023 financial year. The ATO has introduced a revised 67 cents-per-hour fixed-rate method to replace the previous 52 cents-per-hour rate and imposes additional record-keeping obligations on individuals.
Also, from the 2023 financial year, the 80 cents shortcut method, introduced during the Covid period, will no longer be available. The only methods available for home office usage claims will be the new “Fixed Rate Method” and the “Actual Cost Method”.
The most notable change is in relation to record keeping. From 1 March 2023, in order to claim home office expenses following the set rate method, individuals will be required to keep records of all the time spent working from home.
The changes to the home office claims are outlined below.
Changes to the Fixed Rate Method
The Rate
The new fixed rate is $0.67 per hour worked from home.
What’s covered by the new rate?
The revised method now covers the following expenses:
- Gas and electricity
- Mobile and home phones
- Internet
- Stationery
- Computer consumables
No additional tax deduction for any of these expenses covered by the rate can be claimed if you use this method.
What additional expenses can be claimed in addition to the 67 cents rate?
- Office furniture and equipment can be claimed separately (please note – if the asset is above $300, it will need to be depreciated over the life of the asset and cannot be claimed outright).
- The repair and maintenance costs for those assets.
- The costs associated with cleaning a dedicated home office.
Record Keeping for the 67 Cents Method
- From 1 March 2023 – all taxpayers must keep record of all hours worked from home during the financial year.
- The Taxation Office no longer accepts estimates or 4-week representative diaries.
- Records for hours working from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.
- In addition, records must be kept for each expense that you have incurred which is covered by the fixed rate per hour (for example, if you use your phone and electricity when working from home, you must keep one bill for each of these expenses).
- It is also recommended that these records are kept for at least five years from the notice of assessment in case of review by the Taxation Office.
Actual Cost Method
The Taxation Office has not announced any changes to the actual cost method. Below is a refresher on how this method works.
- The actual cost method permits all running expenses such as gas, electricity, cleaning, heating, cooling, internet, etc to be claimed based on the additional costs from working from home.
- All receipts, bills and other similar documents must be kept to show you have incurred the expenses.
- An apportionment must be created between work and private use to claim these expenses by creating a 4-week representative diary to show a usual pattern of working at home.
- There is no rate for hours worked from home, you are purely only claiming the expenses based on the additional costs due to working from home.
Many taxpayers find the substantiation requirements involved in claiming the actual cost method burdensome and time consuming, hence the popularity of the fixed rate method. But now, the fixed rate comes with its own burdensome compliance obligations, which is bound to prevent many taxpayers from claiming at all.
If you have any questions or concerns about these changes, please do not hesitate to reach out, or view the changes on the Taxation Office website.