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.
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
However, under the draft guidance, as of 1 July 2022, work-from-home taxpayers can continue to claim ‘actual expenses’ or use a revised fixed rate method.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 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.
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:
To prove that you actually incurred the costs and how you calculated your WFH expenses, you must provide evidence such as the following:
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.
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.