If you’re working from home, it's important to know how you can claim deductions for the expenses you incur in order to remain tax-compliant and maximise your tax savings.
Fortunately, the Australian Taxation Office (ATO) has made things easier by updating the way you can calculate and claim working from home tax deductions.
Am I eligible to claim work from home deductions?
If you want to claim a deduction for working from home expenses, you need to meet these three criteria:
- You have additional expenses because you work from home
- You are working from home to fulfil your job duties, not just doing minor tasks like checking emails or answering phones
- You must keep records of the cost while working to prove it
To calculate your working from home deductions, you have two methods to choose from: the revised fixed rate method or the actual cost method.
What’s the difference between the actual cost and the revised fixed rate methods?
Understanding the difference between the revised fixed rate method and the actual cost method can help you determine which is best suited for your particular situation to maximise your tax savings.
Keep in mind though that regardless of which method you choose, you will need to keep the correct records if you want to claim a work from home deduction. And, you can only claim your work-related expenses.
Actual cost method
The actual cost method lets you claim deductions for the specific expenses you have while working from home, and it stays the same for the 2022-2023 income year.
You can claim deductions for various expenses like internet, phone usage, electricity, and office supplies like ink and stationery.
You can also claim deductions for the depreciation of your work from home assets like your computers and furniture, and even cleaning services for your dedicated home office if you have one.
Revised fixed rate method
While the actual cost method is the same as the previous year, the revised fixed rate method has been updated to match the way people work from home today.
It simplifies calculating your expenses so you don't have to spend time figuring out how to split up costs between personal and work use by allowing you to claim 67 cents for every hour you work from home.
You don't need to have a dedicated home office to use this method, and it covers expenses such as:
- data and internet
- mobile and home phone usage
- electricity and gas,
- computer consumables (e.g., printer ink)
You can't, however, claim separate deductions for these expenses.
What you can claim deductions on are the decline in value of the assets you used while working from home (e.g., office computers and furniture), the repairs and maintenance of these assets, and cleaning services of your work area if you have a dedicated home office.
How do I claim work from home deductions in the 2022-2023 income year?
To claim work from home deductions in the 2022-2023 income year, it's important to keep accurate records of your expenses and working hours. Here are a few reminders from the ATO.
Record keeping for actual cost method
- Have a record of the actual hours you work from home during the entire income year or a 4-week period that represents your usual working pattern at home.
- Keep receipts, bills, or invoices for every expense you plan to claim, as well as evidence that shows how much of the expense is for work-related purposes
- Show how you calculated the amount you are claiming as a deduction
Record keeping for revised fixed rate method
- Keep a record of all the hours you work at home throughout the year, which can be done through a timesheet, work schedule, diary, or similar document.
- Have evidence that you paid for expenses included in the revised fixed rate method, such as phone and electricity bills.
- Keep records for items you claim as a separate deduction.
- If you work both at home and at your office, you can still use the fixed rate method to claim expenses related to the work you do at home.
- The ATO will allow a record of hours worked from home during July 1, 2022, to February 28, 2023. For example, a diary for four weeks can be used to calculate the total hours worked for that whole period.
- Starting from March 1, 2023, you must keep track of the exact number of hours you have worked from home. You can use a timesheet, diary or online time tracker. Here’s a sample working from home diary that could be used for this purpose.
Remember, don’t claim the expense if you don’t have the record to back it up.
Need help filing claims for work from home deductions?
Deciding which method to use can depend on a number of factors, such as the amount of work you do from home, the types of expenses you incur, and whether you have a dedicated home office.
If you're unsure which method is right for you, give us a call. We can advise you on the best approach based on your individual circumstances.