The ATO’s new work from home deduction rules – practical or onerous?

The ATO have announced changes which will impact taxpayers who claim the “Working From Home” (WFH) deductions under the “fixed rate” method, applicable from 1 July 2022 in their 2022-23 income tax returns

The significant changes announced as part of the new ATO guidelines in PCG 2023/1 are as follows:

  • The cents per work hour has increased from 52 cents to 67 cents.
  • Taxpayers will be required to keep records of the actual hours worked from home, commencing from 1 March 2023. The ATO will not accept estimates or a representative 4 week diary or similar documents from 1 March 2023, with the period between 1 July 2022 to 28 February 2023 being acceptable.
  • The revised fixed rate method can only be used by taxpayers who are actually working from home to fulfill their employment duties. The carrying out of minimal tasks, like checking of emails or taking calls will not satisfy the criteria of working from home.
  • 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.
  • The revised fixed rate does not require taxpayers to have a dedicated home office area.
  • The revised rate of 67 cents per work hour covers energy expenses (electricity and gas), phone usage mobile and home), internet, stationery, and computer consumables. No additional deductions for any of these expenses covered by the rate can be claimed if you use this method. However, the following expenses can be an additional claim since they are not incorporated in the 67 cents rate:
    1. The decline in value of assets (depreciation) used while working from home, such as computers and office furniture;
    2. The repairs and maintenance of these assets; and
    3. The costs associated with cleaning a dedicated home office.

Records must be kept for each expense taxpayers have incurred which is claimed under 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).

A concerning aspect of PCG 2023/1 is that taxpayers who object to the ATO’s assessment of their working from home claim covered by the revised fixed rate method, will only be able to use the “actual cost” method when calculating their working from home claim. This essentially implies that at objection, the only method available to the taxpayer is the actual cost method. We note, there has been no change to the “actual cost” method as part of the announced changes.

In summary, while the ATO is continuing to allow claims to be made where there’s no dedicated work area and multiple taxpayers in the same property can continue to use the fixed rate method simultaneously, whether the changes are practical especially in terms of record keeping requirements from 1 March 2023 is to be seen in the future.

Should you have any queries please contact your usual Mazars advisor or alternatively one of our experts via the firm below or on:

Brisbane – Simone Gordon

Melbourne  - Amanda Castricum

Sydney – Deepra Sen

+61 7 3218 3900

+61 3 9252 0800

+61 9922 1166

Author: Deepra Sen

Published: 28/02/2023

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