New Rules for Working From Home Deductions

The ATO has some new rules for working from home deductions. Don’t worry we have you covered with a few handy checklists and a free calendar.

Here’s what you need to know:

There are two categories of working from home expense deductions: running expenses (phone, internet etc), and occupancy expenses (rent, rates etc).

In calculating a deduction for additional running expenses incurred as a result of working from home, the ATO allows taxpayers to choose from the fixed-rate method and the actual cost method (a temporary shortcut method was also available to cover the period when many employees worked from home during the pandemic).

Fixed Rate Method

Until 30 June 2022, the fixed-rate method allowed a deduction of 52 cents per hour for each hour a taxpayer worked from home. From 1 July 2022, the rate has changed to 67 cents per hour, and the list of expenses covered by the fixed rate has changed.

If you want to read more about this see Banter Blog article “The ATO’s new working from home deduction rules” for an explanation of the revised fixed-rate method from 1 July 2022.

As the ATO are moving toward the digital future, they want to make basic individual tax returns redundant . The ATO will automagically finalise for you. Culturally, Australians LOVE a dubious tax deduction. That’s why the rules are changing, to start reducing the dubious tax deductions.

So the new rate covers internet and phone expenses, but carves out your laptop. Which tbh, is pretty reasonable. But a back of the envelope calculation is not going to cut it now.

Table-1-WFH Tax Banter, 2023. www.taxbanter.com.au/the-atos-new-wfh-deductions-rules/

To be clear - the revised fixed-rate method, from 1 July 2022 taxpayers cannot claim separate deductions for mobile phone expenses and internet expenses anymore.

For taxpayers using the revised fixed-rate method, the ATO will allow them to keep a record which is representative of the hours they worked from home from 1 July 2022 to 28 February 2023 as a transitional concession. However, from 1 March 2023, the taxpayer must keep a record of the total actual number of hours they worked from home. The ATO will not accept an estimate based on a shorter period of time.

Here’s where we’ve helped you out with some really pretty calendars:

Working from home calendar 4 Month (2022/2023)

Working from home calendar 12 Month (2023/2024)

Actual Cost Method

Look, we probably won’t be recommending this method but if you do want to, here are some tips:

You will need to keep a record for every expense you claim. Yep.

Checklist for the Actual Cost Method

Hot Tips

Generally the costs of travelling between home and work are not deductible — performing work-related tasks at home or whilst travelling as a matter of choice or convenience does not convert the travel to being part of the employment. Exceptions apply and some home-to-work travel is deductible. Read more here: Deductions for motor vehicles

The cost of conventional clothing is not deductible just because the employer requires or expects the taxpayer to wear it.

If your employer provides a laptop or phone, that’s usually deducted by them. So let’s not double dip.

Some good news:

We’re still pretty good at tax returns, so we would recommend you check out our upcoming post on how the Digital Boost (computers and software) will be giving business owners additional deductions.