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Changes to (WFH) working from home deductions for 2022-2023
As of 1 July 2022, the Australian Taxation Office (ATO) has implemented significant changes to the methods for calculating working from home (WFH) deductions. These alterations have been detailed in the latest guidance published by the ATO, outlining the record keeping requirements for individuals seeking to claim WFH deductions in the 2022-23 financial year and beyond.
The ATO has now streamlined the WFH deduction calculation process, providing taxpayers with two methods to choose from: the revised fixed rate method, and the actual cost method. Taxpayers will be able to select their preferred method of calculation, depending on their specific circumstances, using guidance set out in PCG 2023/1.
A notable change in this latest guidance is that a dedicated work area in the home is no longer a requirement to claim WFH deductions. Furthermore, different taxpayers within the same household can now choose individual methods of calculation.
It is important to note that taxpayers must ensure they maintain accurate records and evidence for any claims made in their tax returns. This is to ensure they are compliant with the ATO's record-keeping requirements and to avoid any potential penalties for non-compliance.
Overall, these changes demonstrate the ATO's efforts to streamline the WFH deduction calculation process, providing taxpayers with greater flexibility and choice in determining the most appropriate method of calculation for their individual circumstances.
From the 2022–23 income year onwards, the two methods available to calculate WFH deductions are the:
revised fixed rate method
actual cost method."
The actual cost method
The actual cost method remains unchanged, and individuals can claim the actual cost of expenses and depreciating assets (ie. such as office furniture and laptop computers) you buy and use while WFH.
The revised fixed rate method
The revised fixed rate method has been updated to better match current WFH arrangements (after two years of the practice becoming commonplace), in an attempt to make it easier to calculate expenses and avoid apportionment calculations.
Taxpayers can use the revised fixed rate method if they meet the following criteria:
they have been WFH while carrying out employment duties or carrying on a business on or after 1 July 2022;
they have incurred deductible additional running expenses; and
they have been keeping and retaining relevant records (ie. tax invoices or receipts).
Record keeping requirements
The finalized guidance in Practical Compliance Guideline PCG 2023/1 explains new record-keeping rules and a revised fixed-rate method that lets taxpayers calculate a deduction at a rate of 67 cents per hour (up from 52 cents) for the following additional running costs:
electricity and gas expenses, for lighting, heating, cooling and electronic items;
internet expenses;
mobile and home phone expenses; and
stationery and computer consumables.
How is the WFH deduction calculated?
A taxpayer should take the following steps to calculate the total deduction for running expenses using the revised fixed rate method:
calculate total number of hours the individual WFH during the income year (based on a timesheet, roster or diary kept contemporaneously);
multiply the total number of hours by 67c per hour;
calculate the work-related decline in value of any depreciating assets used to WFH and any other running expenses incurred (supported by invoices etc) which are not covered by the 67 cents rate per hour (above); and
then the amount of any deduction is the total of the amounts obtained from the second and third points above.
The revised fixed rate method can also be used by businesses that operate some or all of their business from home to claim home based business expenses.
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