Hien Hoang: 0448 012 728 and Brian Spurrell: 0412 011 946

Many of you will now be accustomed to making a claim for expenses incurred whilst working from home. Some of you may have found yourselves working either part-time or full-time at home due to the impact of COVID-19 and have been entitled to a significant work related deduction.

Instead of having to itemize each cost incurred in working from home, the ATO made the task of claiming these costs easier by instituting a “shortcut” rate of $0.80 per work hour with the only requirement being maintaining a record of the number of hours worked from home such as a timesheet or diary.

The additional running expenses covered by the new hourly rate applicable from 1st March 2020 included lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in the value (depreciation) and repair of home office items such as furniture in the area used for work, phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

This all-inclusive optional and time saving method has been a very popular method saving lots of time that would otherwise be devoted to substantiating the amount of each of the above costs to the extent that they were incurred due to the time spent working from home.

This shortcut rate of $0.80 cents has been extended to 30 June 2022 but there has been uncertainty as to whether the rate will be available for the 2023 financial year. The ATO Document QC 31977 dated 22nd August 2022 disclosed that this method is only available up until 30 June 2022 and further states that the ATO is “updating the methods available to calculate your working from home expenses for the 2022-23 income year”.

Draft Practical Compliance Guideline Ref PCG 2022/D4
This document released in November 2022 is titled “Claiming a deduction for additional running expenses incurred while working from home – ATO compliance approach”.

Whilst this is a draft guideline with the closing date for comment set at 30th November 2022, it is indicative of the likely changes applicable from 1/7/2022 and is summarized as follows:

“The draft Guideline will allow taxpayers working from home to use a new method to claim the additional running expenses they incur as a result of working from home. When this Guideline is finalized, the new method (the revised fixed rate method) will be available for taxpayers to calculate their working from home expenses from 1st July 2022”

Furthermore the summary states that the $0.80 shortcut method explained above and the earlier $0.52 rate will no longer be available for taxpayers to calculate their working from home expenses.

So much for those of us that have assumed the $0.80 fixed rate method would be available post 30th June 2022.

The Guideline does however allow taxpayers to continue to claim their actual expenses or alternatively they can use the revised fixed rate method outlined in the Guideline from 1st July 2022.

Relevant Guidelines

  • You do not need to have a separate home office or dedicated work area set aside in your home in order to rely on information in this Guideline.
  • If more than one taxpayer in your household is working from home at the same time, each taxpayer will be able to rely on the Guideline providing each taxpayer meets the requirements for deductibility.
  • Taxpayers working in the same household at the same time can choose to use either the revised fixed rate or actual expenses method.
  • If you do not use the revised fixed rate method you will need to use the actual expenses method.

The new revised fixed rate method covers the following additional running expenses you incur on a fair and reasonable basis by using a fixed rate of $0.67 per hour worked from home from1st July 2022.

  • Energy expenses (electricity or gas) for lighting, heating/cooling and electronic items used while working from home.
  • Internet expenses
  • Mobile and/or home phone telephone expenses, and
  • Stationery and computer consumables

To calculate your total deduction for running expenses using the revised fixed rate method you:

a) Calculate the number of hours you worked from home during the income year based on your records. For only the 2022-23 income year you need to keep:

  • a record which is representative of the total number of hours worked from home during the period from 1st July 2022 to 31st December 2022, and
  • a record of the total number of actual hours you worked from home for the period 1st January 2023 to 30th June 2023. For the 2023-24 and later years you must keep a record for the entire income year of the number of hours you worked from home during that income year

b) Multiply the total number of hours you worked from home during the income year by 67c per hour.

c) Calculate the work related decline in the value of any depreciating assets that you used to work from home during the income year and any other running expenses incurred and not accounted for in the 67c per hour rate.

d) Add the amounts calculated from b) and c) above and this total will be the amount you claim as your deduction for working from home at D5 in your Work Related Expenses Schedule of your tax return.

Further information can be obtained from the Draft Practical Compliance Guideline PCG 2022/D4

Please remember this document is a draft version and it will be updated to the official version in the near future once comments submitted have been processed.

The content of this article is not intended to be relied upon as professional advice and should not be used as such. If you have any questions you should consult a registered tax agent.
Brian Spurrell B A, B Com, Dip Ed, FCPA, Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113 Ph: 0412 011 946
Web: www.ptasaccountants .com.au