From 1 July 2022, there will only be two methods available to individuals who wish to claim deductions for working from home expenses, the ‘fixed rate method’ and the ‘actual cost method’.  In addition, substantiation requirements have changed.

The previous ‘shortcut method’, which provided an 80 cents per hour flat rate, is not available for use after 30 June 2022.

Fixed Rate Method

The new rate is set at 67 cents per hour.  The fixed rate method provides a simple method of calculating a deduction for the costs associated with working from home such as:

• Electricity and gas for heating, cooling, lighting and electronic items used while working from home;
• Internet expenses;
• Mobile and/or home telephone expenses; and
• Stationary and computer consumables.

Separate deductions are available for the work-related decline in value of any depreciating assets used when working from home, as well as any other running expenses not listed above.

Record-keeping requirements

From 1 March 2023, an individual using the fixed rate method will need to keep a record of the actual hours worked from home (e.g. timesheets, rosters, time-tracking apps, logs of time spent accessing employer systems or online business systems or a diary kept contemporaneously).  As the draft version of PCG2023/1 was not finalised until February 2023, the ATO is allowing individuals to keep a record which is “representative” of the total number of hours worked from home for the period 1 July 2022 to 28 February 2023.

The ATO also requires evidence in relation to each of the running expenses listed above.  For energy, mobile and/or home telephone and internet expenses, one monthly or quarterly bill per item needs to be retained.  If the bill is not in the taxpayer's name, additional evidence is needed to prove the taxpayer incurred the expenditure (e.g. a joint credit card statement showing payment or a lease agreement indicating that the taxpayer shares the property with others).  For stationery and computer consumables, one receipt needs to be kept for each item purchased.

Actual Cost Method

This method provides individuals who have a dedicated workspace at home to make more substantial claims for additional costs incurred when working from home.

To make a claim under this method an individual needs to:

• Have incurred additional costs as a result of working from home; and
• Have a dedicated room or space availability to them solely, in which they use to work from home.

An individual must keep the following evidence to make a claim under this method:

• Either a record of the number of actual hours they worked from home during the income year, or
• A diary for a representative four-week period to show their usual pattern of working at home.

In addition, when using this method, individuals need to keep receipts or other written evidence that detail the amount incurred on:

• Actual additional expenses;
• Office furniture and furnishings purchased; and
• The work related use of items purchased to work from home.  For example, some items may only be used a portion of the time while working from home such as your computer, internet or phone.

Examples of calculating an individual’s deduction for additional costs incurred are:

• Using an itemised phone or internet bill, where work related use is calculated over a 4 week representative period.  The calculated percentage during the representative period is then applied to the entire year.
• For other costs such as heating, cooling and lighting, additional costs incurred are calculated based on diary records.

For additional information based on your circumstances or if you have any questions, please contact our office.