The Australian Taxation Office (ATO) has announced some major tax changes affecting the millions of Australians who work from home. These changes will alter the way in which individuals can claim working from home tax deductions, with the aim of providing clearer guidelines and ensuring fairness in the tax system. It’s now the perfect time to explore the key changes and what they mean for you while working remotely.
Key changes for WFH employees in 2023
Please find below a comprehensive breakdown of the key changes introduced by the ATO and their impact on tax deductions for individuals working from home. We’ll provide clear explanations, practical examples, and actionable tips to help you navigate these changes effectively. Stay tuned to ensure you’re up to date with the latest information and make the most of the opportunities presented by the evolving work landscape.
“Fixed Rate” Method Revision
One of the more significant changes introduced is the revision of the “fixed rate” method for claiming work from home tax deductions. The fixed rate method allowed individuals to claim deductions for expenses such as energy bills, phone usage, and internet. Starting from the 2022-23 income year onwards, the fixed rate will increase from 52 cents to 67 cents per hour. This adjustment takes into account costs that are challenging for taxpayers to calculate precisely, such as phone, internet and electricity expenses.
Separate Claims for Assets and Equipment
It’s important to note that the revised fixed rate method does not include deductions for assets and equipment typically associated with working from home, such as tech and office furniture. Taxpayers will need to claim these separately using the appropriate methods, emphasising the need for individuals to maintain accurate records and receipts for such expenses.
No Dedicated Home Office Space Required
Unlike the previous requirements, the revised fixed rate method no longer necessitates a dedicated home office space. This is good news for those who work from various areas within their homes or who have limited space. The ATO recognizes that many Australians have adapted their work arrangements due to the pandemic and this change allows for greater flexibility when claiming expenses.
End of the “Shortcut Method”
The “shortcut method,” which allowed individuals to claim 80 cents per hour for work from home expenses, has come to an end. Introduced during the pandemic, this method provided a simplified approach to claiming deductions. However, with the easing of restrictions and the return to normal working conditions, the ATO has reverted to the revised fixed rate method as the primary means of claiming working from home expenses.
Maintaining Detailed Records
To ensure compliance with the new regulations, it is crucial for Australians to keep accurate records of their work from home activities and expenses. Starting from March 1 2023, individuals will be required to maintain an ongoing diary for each work-from-home day throughout the year. A representative four-week diary will no longer be sufficient. You can prepare timesheets, rosters and activity logs of time spent accessing employer or business systems, or even a diary for the full year. Additionally, it is essential to retain copies of utility bills and any other relevant documents that support the claimed deductions.
Always ensure you understand new requirements to avoid facing potential issues with your tax returns. By maintaining detailed records and seeking professional advice, you can navigate these changes smoothly and make the most of available deductions while working from home. Remember that you can always rely on our experienced team of accountants and tax advisors.
Book your appointment with BTMH. We can prepare your tax return 100% online or during your visit in our office in Bondi Junction, Sydney.
