ACTION REQUIRED: Record Keeping Requirements to Claim Tax Deductions for Working from Home
Last year, the ATO released a tax guidance (PCG 2023/1) for claiming tax deductions for working from home.
You need to be aware of these changes so that you can keep the appropriate records to maximise your tax claims in your 2024 Tax Return.
WHAT ARE THE KEY CHANGES?
From 1 July 2022, the ATO has explained that taxpayers who are working from home can claim deductions based on:
- Actual expenses, or
- Revised fix rate method of 67 cents per hour
A key change is that you do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the fixed rate method.
Also, if more than one individual is working from home at the same time, each individual will be able to apply the fixed rate method if they each meet the requirements.
To be eligible to claim tax deductions for working from home expenses, you must:
- Incur additional running expenses as a result of working from home
- Be working from home to fulfil your employment duties, not just completing minimal tasks
- Keep records at the time you work to prove you incur the cost
Revised Fixed Rate Method
The revised fix rate method:
- Allows a claim of 67 cents per hour worked from home
- Removes the requirement to have a dedicated home office space
- Includes claims for:
- Data and internet
- Mobile and home phone usage
- Electricity and gas
- Computer consumables (e.g. printer ink)
- Stationery
- Allows taxpayers to separately claim the work-related portion of the following:
- Immediate deduction for items that cost less than $300 (e.g. keyboards, computer mouses, power boards, desk lamps and chargers)
- Depreciation of office furniture and computers (items that cost more than $300)
- Repairs and maintenance of these assets
- Cleaning (only if you have a dedicated home office)
VERY IMPORTANT: THE RECORDS YOU NEED TO KEEP FOR THE FIXED RATE METHOD
You need to keep the following records to prove your fixed rate method working from home tax deductions for the 2024 financial year:
- A record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document.
- At least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses.
NEXT STEPS
To use the revised fixed rate method and claim 67 cents per hour for working from home expenses in your upcoming 2024 Tax Return, you will need to review your records of your actual hours working from home.
A record of your hours for the income year can be in the form of:
- Timesheets
- Rosters
- A diary or similar document kept concurrently
You must also keep evidence for each of the additional running expenses that you incurred. The documents you need to keep in order to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense. For energy, mobile and/or home telephone and internet expenses, you must keep one monthly or quarterly bill. If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses; for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others.
For stationery and computer consumables, which are occasional expenses, you must keep one receipt for each item purchased.
ACTUAL COST METHOD
The actual cost method allows you to claim a tax deduction for the actual expenses you incur as a result of working from home. Using this method, you are required to keep an invoice/receipt for every expense you claim.
Expenses You Can’t Claim
The ATO has stated that you can’t claim a tax deduction for:
- Coffee, tea, milk and other general household items, even if your employer may provide these at work
- Costs that relate to your children’s education, such as equipment you buy – for example, iPads, desks, or subscriptions for online learning
- Items your employer provides – for example, a laptop or mobile phone
- Expenses for which your employer reimburses the cost
As an example, if you work in the lounge while your family watch television, you won’t have incurred additional costs and will not be eligible to claim a deduction.
For cleaning costs, where you have a room set up for the home office, after allowing for private use, you can determine your claim by the floor area as a percentage of the whole home.
With electricity and gas costs for heating, cooling and lighting, you will need to review their consumption per unit and the average units you use per hour to apply this against your total hours worked.
Stationery and consumables will need their receipts for the items you bought and used.
Phone and internet will need to be reviewed over a continuous 4-week itemised bill and/or call log for the proportion you can claim of your costs.
While there are some additional record keeping requirements for the fixed rate method, these are still less than what you’ll need to satisfy the actual cost method.
Please feel free to contact our office and speak with one of our accountants if you need any assistance with this so we can help you to maximise your tax deductions in your 2024 and future year Tax Returns.