There were a lot of changes to the way people worked (and are still working) after COVID-19. Following these changes the ATO introduced an easier way to claim a tax deduction for the time you worked at home. This was known as the ‘shortcut’ method and simply meant that you claimed 80 cents/hour that you were working.
Unfortunately that ‘shortcut’ method has changed from the 1st July 2022. Don’t stress, that doesn’t mean that you can’t claim a tax deduction for the time you work at home, it just means you need to keep a lot more records and the rate you can claim has changed.
Let's take a closer look.
In a nutshell you can claim costs such as heating, cooling and lighting for the area in your home that you have been working from. As well as things like mobile, home phone and internet if you were required to use these as part of your job. Claiming these actual expenses is known as the ‘actual method’
You have always been able to claim the above costs for working at home, but the ATO have made the process even easier, by giving us a fixed method to calculate your deduction, the ‘shortcut’ method. You can now simply claim 67 cents per hour, for every hour that you have had to work at home.
But there is a catch…..(as always). If you claim the ‘shortcut’ method you can’t then also claim internet, mobile phone, stationery or computer consumables on top of the 67 cents/hour claim. This amount is all encompassing when it comes to home office deductions (with the exception of things like depreciation on a computer).
In order to claim using either of these methods you first need to ensure you meet 3 basic tests :
- Genuine work or business activities are undertaken at home. It’s important to note that taking phone calls or occasionally checking emails at home doesn’t qualify.
- You actually incur additional running costs. This means you physically pay for increased electricity, internet etc.
- You have kept records of this work.
What method should I use?
If your job requires you to work from home then you have 2 options for your deductions :
- Claiming your actual expenses
- the normal fixed rate of 67 cents per hour PLUS the work-related portion of expenses not covered by that rate
Actual Expenses
This is by far the most complex, and time consuming of the deduction methods.
Firstly, you must have a dedicated home office working area in order to claim using this method. You need to keep a record of the number of hours you work at home during the year including keeping a 4 week diary showing your usual pattern (ie when you start and finish work and when you take a break).
You can claim the cost of any home office furniture, cost of phones, computers or laptops (note these need to be depreciated over a number of years). Note, you need to ensure you are only claiming the work-related percentage of these, ie if you also use the computer for personal emails etc then you won’t be able to claim 100% of that cost. You can claim your Mobile and Internet, but only for the work related portion. Again you need to do a calculation showing the private use vs work related use over a 4 week period. You can claim the cost of ink, printing & stationery. But again you can only claim the work-related percentage (yes I know, I sound like a broken record). You can then claim the actual cost of lighting, heating and cooling. To do this you need to work out the cost per unit of the power used, the average units used per hour (the power consumption per kilowatt hour for each appliance, equipment or light), and then you need to work out the total annual hours used for each item.
Yep, this one requires a LOT of paperwork and calculations. But is of course worthwhile when you are working from home permanently.
Fixed Rate
If the above seems too much then you can claim the Fixed rate or ‘shortcut’ amount of 67 cents per hour that you work from home.
Just a reminder this fixed rate covers your internet, mobile and home phone, lighting, cooling, heating, stationery and consumables, ie you don’t claim those expenses on TOP of the 67 cents.
To use the fixed rate method you no longer need to have a dedicated office area in order to claim this deduction. You need to keep a record of the actual hours you spent working at home for the entire income year, this can be with timesheets, a diary, roster etc. You are also now required to keep at least one record of each of the expenses you incur such as a phone bill, electricity bill, receipt for stationery etc to prove that you incurred costs working from home.
You can still claim the cost of equipment that you use as a separate deduction. To claim these you need to have receipts.
What proof do I need?
You are required to keep proof of the fact that you were working from home as well as a record of the hours that you have spent. Whilst you don't have to lodge this proof with your tax return, if you are audited, you will need to show these records to the ATO.
If your employer has allowed you the flexibility to perform required working hours each week from home, instead of your normal workplace, you should keep this with your tax records. You can then keep a record of your timesheets, a diary showing the hours worked or your roster that will back-up the number of hours your employer was paying you for.
Because these new changes only came into effect during this income year you are allowed to keep a record that is representative of the total hours worked from 1 July 2022 to 28 February 2023 (ie you don’t have to have each week of your timesheets showing when you worked at home), BUT for all claims from the 1st March 2023 onwards you will need to have week by week proof of the total hours.
What can't I claim?
You can't claim the cost of things that you would ordinarily get at work. So that means you can't claim tea, coffee and milk or toilet paper! You also can't claim the costs of anything your employer has paid for on your behalf.
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