Working from home has become a regular occurrence for many people as the COVID-19 pandemic comes to an end. As of 1 July 2022 the government has ended the temporary working-from-home methods set in place to help Australians during the pandemic and has proposed new changes for the 2022-23 financial year.
The information in this blog will introduce you to the new changes set in place and will explain how you can claim your working-from-home tax deductions in your tax return.
The new proposed changes for working-from-home tax deductions
The Australian government has proposed new procedures for claiming working-from-home expenses in your tax return. The recent changes see fixed rates increase from 52c per hour to 67c per hour.
To claim the revised fixed rate method in your tax return, participants no longer require a dedicated workspace in their homes.
What working from home tax deduction has ended?
The government’s temporary 80c per hour shortcut method has stopped after being extended out to 30 June 2022, leaving participants with only two options for claiming work-from-home tax deductions. The last year that you can claim this in your FY22 tax return.
Eligibility to claim in your tax return
You are eligible to claim working-from-home tax deductions if you meet the following criteria:
- You are working from home, and you are completing work duties that are not minimal tasks like occasionally checking emails or taking calls
- You incur additional expenses while you are working from home.
What expenses can you claim working at home?
The new working-from-home changes have seen the addition of claimable expenses on the fixed-rate working from home method. Previously, running expenses included heating, cooling, lighting, and cleaning costs. The revised method also includes phone, internet, computer consumables, and stationery. The increase from 52c to 67c per hour is attributable to the addition of new items added.
If an item is used for both work and personal use, only the proportion used for work can be claimed. To calculate the proportion used for work, divide the hours used for work by the total time you used the item.
For example, you have used your laptop for a total of 100 hours, and 80 hours were spent working. 80 / 100 = 80%. You can claim 80% of the expenses related to your laptop.
If something breaks while you’re working from home, the repair costs or the cost of replacement are deductible.
For items over $300, you can only claim the depreciation proportion of the item. We can also look at depreciating items from prior years that may not have been claimable. Speak to one of the team at One Click Life before you do this!
You may be able to claim occupancy expenses such as rent, mortgage, and home insurance if there is no alternative to working from home and you have a dedicated work area at your home.
What can’t you claim?
You cannot claim any of the following in your tax return as a working-from-home expense:
- Typically, you cannot claim occupancy expenses like rent, mortgage, and home insurance while working at home unless you meet strict criteria
- General household items such as coffee, tea, and milk
- Items that are provided by your employer
- Expenses that your employer pays for or reimburses you for
- Costs that are used for your child’s education such as iPad, desk, or subscription for learning.
How can you calculate your tax deductions?
After the proposed working-from-home changes, the shortcut method of claiming all expenses for 80c per hour is no longer available. To claim tax deductions related to working at home you can use the fixed rate method or actual cost method in your tax return.
Fixed-rate method
With the fixed rate method, the amount of time you work is inclusive of all expenses. For every hour you work at home, you can claim 67c using the fixed-rate method. The 67c per hour covers all the running costs of the items mentioned in the ‘What expenses can you claim from working at home?’ section.
To calculate your expected deduction, multiply the number of hours worked from home by 67c. For example, you worked 500 hours at home during the year. 500 hours * $0.67 = $335.
Records you need to keep
- Record the number of hours you work at home
- Alternatively, you can use a diary for 4 weeks to show your typical working pattern
- Receipts for all depreciating assets or expenses you use when working at home
- Records/ diaries of your work-related use of assets
- 4-week record of phone calls used for work
- Internet usage
- Percent of the year that our depreciating assets are used for work
Actual cost method
Includes the expenses you incurred while working from home. The actual cost method entails directly tracking all the expenses that you incur and involves keeping a record of all your receipts. The actual cost method uses receipts collected and the proportion of time items are used for work to calculate the tax-deductible working-from-home expense.
Records you need to keep
- Record the number of hours worked for the year
- Or a Diary of a 4-week period that shows your typical work pattern
- All receipts, bills, and other documents that are used for your deduction
Other broad working-from-home expenses
You can claim additional working-from-home expenses on top of the fixed-rate or actual cost methods. Some of these include:
- Car expenses if you are seeing a client or use heavy equipment
- Self-education expenses for your job
- Union membership fees
- Equipment and stationery
- Laptops, computers, and software
If you’d like to learn more about the tax deductions you can claim while working from home, contact One Click Life. Lodging a tax return at One Click Life only takes 5 minutes!
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