Working from Home Deductions for the 2023 Financial Year

With the start of the 2023 financial year and the end to the Covid restrictions, the Australian Tax Office (ATO) has introduced a revised fixed-rate method for calculating the deduction an individual can claim for expenses incurred while working from home.

This method will replace both the previous fixed rate option of 52 cents per hour and the temporary Covid shortcut of 80 cents per hour, which came to an end on 1 July 2022. The actual cost method is still available if you wish to calculate your actual expenditure incurred while working from home.

Prior to 1 July 2022, the fixed-rate method entitled taxpayers to claim 52 cents per hour towards running expenses for electricity and gas, home office cleaning and repair expenses and the decline in value of office furniture and furnishings.

This year the fixed-rate method provides a fixed-rate deduction of 67 cents per hour for the following expenses:

• Electricity and gas
• Internet expenses
• Mobile/home phone expenses
• Stationery and computer consumables

Despite the fixed rate increasing from 52 cents to 67 cents, it now incorporates some additional expenses which means that taxpayers are not able to claim a separate deduction for those items. The main change is with the inclusion of the phone & internet expenses.

Conversely, taxpayers can now separately deduct the decline in value of depreciating home office assets (such as an immediate deduction for home office furniture purchased for less than $300). However, it is expected that the revised fixed-rate method will still disadvantage most taxpayers.
The updated guidance from the ATO also includes stricter record keeping requirements to verify hours worked from home.

According to the ATO website:

• Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document under this method from 1 March 2023.

• Records of hours worked 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.

• Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses).

If you have any questions please give us a call on 03 9682 7011 to discuss.

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