ATO’S new working from home deduction rules
FBT for 2023 – Electric vehicles exemption
13/03/2023
ATO’S new working from home deduction rules
The ATO has released its final guidance PCG 2023/1 in relation to a revised fixed-rate approach to claiming deductions for additional running expenses incurred while working from home with effect from 1 July 2022
Changes from July 2022
The Guideline applies from 1 July 2022 and allows taxpayers to claim a rate of 67 cents per hour for particular expenses which are difficult to apportion, such as electricity and internet expenses.
From 1 July 2022 taxpayers can only:
- Use the revised fixed rate method to calculate the deduction; OR
- Claim the actual expense
Revised fix-rate method
Taxpayers are eligible to rely on the Guideline to calculate deductions using the revised fixed-rate method if they meet the following criteria:
- Taxpayer must be working from home on or after 1July 2022
- Taxpayer must incur deductible additional running expenses listed in the guideline and s8-1 of the ITAA 1997.
- 2.1 Comparative exercise is not required to demonstrate that a taxpayer has incurred additional running expenses. This can now be demonstrated by the number of hours the taxpayer has worked from home.
- 2.2 Where a third party (eg. Employer) has reimbursed the taxpayer for additional running expenses, the taxpayer will not satisfy this criterion.
- 2.3 Where invoices and bills are in the name of one member of the household, and the cost is shared, each member of the household who contributes to the payment will be taken to have incurred it.
- 2.4 The additional running expenses which are covered by the 67 cents per hour rate;
3. Taxpayers must keep and retain relevant records
- Showing the total number of hours, they worked from home during the income year
A record of hours for the income year can be in any form, provided it is kept contemporaneously.
One document (eg. Invoice, bill or credit card statement) for each of the listed running expenses which they have incurred during the income year.
- For energy, mobile and home phone and internet expenses, the taxpayer must keep one monthly or quarterly bill. If the bill is not in the taxpayer’s name, they will also have to keep additional evidence showing they incurred the expenses, (e.g. a joint credit card statement showing payment or a lease agreement showing they share the property, and therefore the expenses, with others)
- For stationery and computer consumables, which are occasional expenses, the taxpayer must keep one receipt for an item purchased.
Claiming separate deductions
A taxpayer who uses the fixed-rate method to calculate their deductions for additional running expenses cannot claim a separate deduction for any expenses covered by the rate
They can however claim a separate deduction for any expenses not covered by the rate, in accordance with the relevant rules;
• S8-1 general deductions
• Div 40 decline in value deductions
• Div 28 car expense deductions
A taxpayer claiming a deduction for decline in value of depreciating assets used while working from home must keep written evidence required by
- Div 900 ITAA 1997 (for employees) and
- s. 262A of the ITAA 1936 (for taxpayers carrying on a business)
An employee must keep, for each depreciating asset, a document which shows:
- the name or business name of the supplier
- the cost of the asset
- the nature of the asset
- the day the asset was acquired
- the day the record was made out.
The taxpayer must also keep records which demonstrate their work-related use of the depreciating asset. This can be evidenced by records of a representative four-week period that show personal and income-producing use of the depreciating assets.
For depreciating assets used in carrying on a business, they must keep records that record and explain all transactions.
Disclaimer
This content is intended for general information in summary form on tax and legal matters at the time of first publication and is not intended to provide and should not be relied upon in place of appropriate professional advice. Please consult your tax, legal and accounting advisors before acting or relying on any content provided.
