There are no more shortcuts when it comes to claiming your work-related expenses this financial year! The popular ‘shortcut’ method is no longer available to be used for the 2022-23 tax returns.
Through this method, individuals could claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, and depreciation on furniture & equipment. If this shortcut method was employed, no other costs could be claimed for working from home. Remember that for the 2022-23 financial year, you must claim any work expenses through the revised fixed rate or actual cost methods, not the shortcut method.
THE REVISED FIXED RATE METHOD
You can claim 67 cents per hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:
- home and mobile internet or data expenses
- mobile and home phone usage expenses
- electricity and gas (energy expenses) for heating, cooling and lighting
- stationery and computer consumables, such as printer ink and paper.
The rate per work hour (67 cents) includes the total deductible expenses for the above additional running expenses. You can’t claim an additional separate deduction for these expenses using this method.
What Records Do I Need?
You no longer need a dedicated workspace at home, but you must have a representative four-week diary of the hours worked from home between 1 July 2022 to 28 February 2023.
Many taxpayers will already have kept records, but if you haven’t, one way to do this would be to look back over your diaries for the past four weeks.
You may also be able to use similar records as evidence as long as they represent the hours they worked from home during those eight months.
From 1st March 2023, the record-keeping requirement has changed again, and you will be required to record all your hours worked from home in a diary or some other format as they occur. This can be in the form of timesheets, diaries, time recording apps, or any other similar document, provided it is kept as they occur.
How Does The Fixed Rate Method Work?
To use the revised fixed rate method, you must:
- incur additional running expenses as a result of working from home
- have a record of the total number of hours you work from home and the expenses you incur while working at home
- have records for expenses the fixed rate per work hour doesn’t cover and that show the work-related portion of those expenses.
THE ACTUAL COST METHOD
Using the actual costs method, you work out your deduction by calculating the actual additional expenses you incur when working from home. This includes expenses you incur for:
- the decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
- electricity and gas (energy expenses) for heating, cooling and lighting
- home and mobile phone, data and internet expenses
- stationery and computer consumables, such as printer ink and paper
- cleaning your dedicated home office.
What Records Do I Need?
To claim your work from home expenses using actual costs, you must keep:
- either a record showing
- the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet
- a continuous 4-week period that represents your usual pattern of working at home – for example, a diary.
- You must also keep records that show:
- the additional running expenses you incurred while working from home, such as receipts, bills and other documents
- how you worked out the amount of your deduction.
How Does The Actual Cost Method Work?
To use the actual cost method to claim actual expenses, you must:
- incur additional running expenses as a result of working from home
- keep records or other written evidence, which shows the amount:
- you spend on expenses
- you spend on depreciating assets you buy and use while working from home
- of work-related use for your expenses and depreciating assets.
Where you incur running expenses for both private and work purposes, you need to apportion your deduction. You can only claim the work-related portion as a deduction.
Australians must know their entitlements and tax deductions when working from home/remotely.
Make sure to consult with your tax adviser regarding concessions, deductions and offsets for your tax return, as they may be able to advise you on what you may be eligible for this year.