New ATO guidelines on the revised fixed rate method for work from home claims

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As a business owner or professional working from home, managing your expenses and ensuring compliance with ATO regulations can be challenging. Understanding deductible expenses and keeping up with the latest rules is essential for maximising your tax deductions.

This guide will help you navigate the new ATO methods for claiming working from home expenses. You’ll learn how to claim home office expenses accurately and maximise your deductions by reading our comprehensive guide on the revised fixed rate method and the actual cost method.

If you need personalised assistance to optimise your tax deductions and ensure compliance, contact us today.

Understanding the revised fixed rate method

Starting from 1 July 2022, the Australian Taxation Office (ATO) introduced the revised fixed rate method for claiming work from home expenses. This method allows you to claim 67 cents per hour worked from home.

What’s included in the 67 cents per hour rate?

The revised fixed rate method covers the following expenses:

• Energy expenses (electricity and gas)

• Phone usage (mobile and home)

• Internet expenses

• Stationery and computer consumables

By using this method, you cannot claim additional deductions for any expenses that are included in the fixed rate.

Important considerations

Since phone usage and internet expenses are included in the fixed rate method, you cannot claim a separate deduction for these expenses if you use your mobile phone for work both at home and elsewhere. If you want to claim the actual cost of your mobile phone or home internet, you must use the actual cost method for all your work from home expenses.

Choosing the right method

Consider your personal circumstances to decide whether the revised fixed rate method or the actual cost method is more beneficial for claiming your work from home expenses.

Factors to consider

Revised fixed rate method

This method is simpler, offering a claim of 67 cents per hour worked from home, covering energy expenses, phone usage, internet expenses, and stationery and computer consumables.

Actual cost method

If you choose this method, remember to keep accurate records of your expenses, including energy bills, internet costs, and office equipment purchases. This method can potentially offer higher deductions but requires detailed record-keeping.

Evaluate which method better suits your work from home situation to maximise your tax deductions.

How to claim work from home deductions

To claim home office expenses, you must have a dedicated home office.

• Keep detailed records: Ensure you have receipts, bills, and other documents for all claimed expenses.

• Track hours worked: Maintain a record of the number of hours worked from home during the income year. This can be either the actual hours or a diary kept for a representative 4-week period.

• Calculate work-related expenses: Document how you calculated the work-related and private portions of the expenses.

• Employer reimbursements: Remember, you cannot claim a deduction for expenses reimbursed by your employer.

Keeping thorough records and understanding these compliance obligations will help you correctly claim your work from home deductions.

What’s covered by the fixed rate method?

Starting from 1 July 2022, the revised fixed rate method allows you to claim 67 cents per hour worked from home. This fixed rate covers a variety of running expenses, ensuring a streamlined way to manage your work from home deductions.

Expenses included

• Internet and data usage: Both home and mobile internet expenses are covered.

• Phone usage: This includes both mobile and home phone expenses.

• Energy expenses: Costs for heating, cooling, and lighting, including electricity and gas.

• Stationery and computer consumables: Items like printer ink, paper, and other essential office supplies.

Using the 67 cents per hour fixed rate method means these expenses are all included in the rate, so you cannot claim any additional separate deductions for them. This method simplifies the process, helping you avoid the need for detailed tracking and individual claims for each type of expense.

What are the work from home office requirements?

To claim deductions for working from home expenses, you must meet the following criteria:

Work-related duties

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

Additional expenses

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

Record keeping

You must have records that show you incurred these expenses.

To calculate your deduction for working from home expenses, you’ll need to use one of the available methods. If you have running expenses that cover both private and work purposes, you must apportion your deduction and claim only the work-related portion.

Claiming expenses outside the fixed rate method

You can claim a deduction for the work-related use of technology and office furniture, such as chairs, desks, computers, and bookshelves. These items are typically depreciating assets that decline in value over time. Additionally, you can claim the cost of repairs and maintenance for these items.

If an item costs $300 or less and is primarily used for work-related purposes, you can claim an immediate deduction for the full cost in the year of purchase. This includes items like keyboards, computer mice, power boards, desk lamps, and chargers.

By keeping accurate records of these purchases and their work-related use, you can ensure you claim the maximum allowable deductions for your home office setup.

Immediate deductions for low-cost work-related items

You can claim a deduction for the work-related use of technology and office furniture, such as chairs, desks, computers, and bookshelves. While these items generally decline in value over time as depreciating assets, you can also claim the cost of repairs and maintenance for them.

If an item costs $300 or less and is primarily used for work-related purposes, you can claim an immediate deduction for the full cost in the year of purchase. This includes items like keyboards, computer mice, power boards, desk lamps, and chargers.

By keeping thorough records of these purchases and their work-related use, you can take advantage of immediate deductions for low-cost items, helping to reduce your tax liability efficiently.

Claiming deductions for depreciating assets over $300

For work-related items costing more than $300, or part of a set exceeding $300, you can claim a deduction for their decline in value over their effective life. For assets with a cost or opening adjustable value of less than $1,000, you can use a low-value pool with a diminishing value rate to calculate the deduction. Ensure you apportion the deduction to claim only the work-related portion if the assets are used for both personal and work purposes.

Claiming additional deductions for dedicated home offices

If you have a dedicated home office, you might also qualify to claim occupancy expenses like mortgage interest, rent, and cleaning expenses specifically related to the work use of your home office. These deductions apply under limited circumstances and can help offset the costs of maintaining your home office space.

Actual cost method

To claim the actual work-related portion of your running expenses, you must have a dedicated home office.

Compliance requirements

Keep detailed records

Ensure you have receipts, bills, and other documents for all claimed expenses.

Track hours worked

Maintain a record of the number of hours worked from home during the income year. This can be either the actual hours or a diary kept for a representative 4-week period.

Calculate work-related expenses

Document how you calculated the work-related and private portions of the expenses.

Employer reimbursements

Remember, you cannot claim a deduction for expenses reimbursed by your employer.

By following these compliance requirements, you can accurately claim the actual cost of your work from home expenses.

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This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.