Tax Deductions for Working from Home

Tax Deductions for Working from Home

The Australian Taxation Office (ATO) has recently revised its approach to claiming deductions for work from home expenses. The new changes reflect the contemporary working from home arrangements that have become more prevalent since the pandemic started.

The finalised PCG 2023/1 Claiming a deduction for additional running expenses incurred while working from home – ATO compliance approach has some key changes from the previous draft issued in November 2022. The ATO has shifted the start date to commence daily record-keeping to 1 March 2023.

One of the significant changes in the revised fixed rate is an increase from 52 cents to 67 cents per hour worked from home. This rate applies to all eligible taxpayers who use a fixed rate for claiming deductions for work from home expenses.

Another important change is that taxpayers no longer need to have a separate home office or dedicated work area to claim deductions for work from home expenses. Taxpayers can claim the expenses for the portion of the home that is used for work purposes. This change is particularly beneficial for employees who don’t have a separate work area at home.

The revised fixed rate also includes phone and internet expenses, as well as electricity and gas usage, computer consumables, and stationery costs. This change acknowledges that most employees need a reliable internet connection and a phone to work from home.

Additionally, taxpayers can separately claim the decline in value of work-related equipment, office furniture, and any other running expenses not covered by the rate per hour. This means that taxpayers can claim the full amount for any work-related equipment or furniture that they purchase, which wasn’t possible with the previous fixed rate.

It’s important to note that taxpayers who claim a deduction for work from home expenses must keep a record of the number of hours worked from home. The record can be in the form of a timesheet, roster, or diary.

These changes are welcome news for many taxpayers who have been working from home during the pandemic. The revised fixed rate is a simple and straightforward way to claim work from home expenses. It also provides relief for taxpayers who don’t have a separate home office or dedicated work area.

In conclusion, the ATO has made important changes to the way taxpayers can claim deductions for work from home expenses. The revised fixed rate reflects contemporary working from home arrangements and is more inclusive of the expenses incurred while working from home. Taxpayers should keep records of their hours worked from home and expenses incurred to claim deductions accurately.