Changes to Work from Home Tax Deductions 22/23

Saturday 10th December 2022

Changes to Work from Home Tax Deductions 22/23

Saturday 10th December 2022
Written by Dan Sullivan

At the height of the pandemic in 2021, two-thirds (67 per cent) of Australians were working from home, compared to 41 per cent pre-COVID. We certainly had many employees doing their jobs remotely for several months. 

While many are now back in our office full-time, some are taking advantage of our more flexible rules, working at least a day or two in the home office. 

Depending on your industry, you may or may not have the same situation. 

During the pandemic, people educated themselves – and we educated our clients – on the rules around work from home tax deductions. But with the introduction of a draft paper from the ATO, there has been a key change. 

PCG 2022/D4 WFH claim change

Draft Practical Compliance Guideline (PCG) 2022/D4, published by the ATO, outlines a new method for claiming work from home expenses. 

As a recap, before COVID, work-from-home tax deductions could be calculated in one of the following ways:

  • The shortcut method – available from 1 March 2020 to 30 June 2022 

  • The fixed-rate method – available from 1 July 1998 to 30 June 2022 

  • Actual expenses – calculating the actual expenses incurred by WFH

However, under the draft guidance, as of 1 July 2022, work-from-home taxpayers can continue to claim ‘actual expenses’ or use a revised fixed rate method. 

The revised fixed rate method

The revised fixed-rate method is used for calculating work-related additional running expenses incurred as a result of working from home, 

As of 1 July 2022, the fixed rate has dropped from 80c to 67c. 

To claim a deduction, you must be able to demonstrate both:

  • That you incurred the expenses, you’re claiming directly as a result of working from home

  • How the income-producing portion of the expenses was calculated 

In other words, you must be able to provide proof.

Proving WFH expenses

To prove that the expenses you’re claiming are directly a result of working from home, you must be able to show the actual hours you worked from home. An estimate is no longer acceptable. 

Examples of sufficient proof include:

  • Timesheets

  • Rosters

  • Work diary

To prove that you actually incurred the costs and how you calculated your WFH expenses, you must provide evidence such as the following:

  • Invoices

  • Credit card statements 

At this stage, the provision of proof clause is only draft compliance. However, it’s due to come into force on 1 January 2023. This means you must start collecting acceptable proof to claim 22/23 deductions from this date. 

Refresh your WFH expenses knowledge

If you’re not claiming WFH expenses regularly and aren’t 100 per cent clear on what working-from-home expenses are deductible, here’s a quick list: 

  • Electricity expenses for heating or cooling and lighting

  • Decline in value of office furniture and furnishings, as well as other items used for work, such as a laptop or tablet

  • Internet and phone expenses

For more detailed information on what WFH expenses you can claim, we recommend you look at the Taxation Ruling TR 93/30 Income tax: deductions for home office expenses.

If you or your employees have any questions related to work from home expenses, contact us today for personalised advice.