dmca advisory accountant Saikiran Ramini answers a tricky tax question…I have heard the tax office has recently reviewed how you calculate your ‘fixed rate’ work from home allowances from March 1, 2023 – what does this mean?
With most of the restrictions of COVID-19 now behind us, the Australian Tax Office has reviewed how ‘fixed rate’ work from home (WFH) allowances will be calculated and the 80-cent, short-cut method has now ceased. The fixed-rate method has now received an increase from 1st July 2022 to 67 cents per hour. Included in this rate is electricity and gas bills, phone usage, internet and mobile data and office consumables. You also no longer need a dedicated home office or work area to claim fixed rate WFH allowances.
Importantly, the alternative ‘actual costs’ WFH calculation method (which provides for depreciation of assets and deductions according to floor space) isn’t changing. You can still choose which method you want to use (fixed or actual costs) when preparing your tax return according to your circumstances.
Fixed rate method needs record keeping for 2022/23
Many people may be unaware that this change is actually coming into play for their next tax return (2022/23). From 1st March 2023, you need to record actual hours. For want of a better description, a logbook will be required to record the actual hours worked from home for the year ending 30 June 2023 and thereafter.
Whether you place a diary near your desk at home, use a spreadsheet or perhaps an app, the actual hours recorded will be used to substantiate your work-from-home deductions.
If you have not kept records in detail, once you get to June 30 and present deductions you might not be eligible for the claim.
What is good record keeping?
A 4-week diary for the year will no longer be enough to claim the fixed rate method after 1 March, so if you haven’t done this already, it may be too late (the ATO will only allow this option up to 28th Feb for the 2022/23 year).
From March onwards with the new fixed rate rules it will be important to set up a timesheet system, or to have evidence each week of how many days and hours you were in your home working as part of your ongoing employment. You must also keep all your stationery, electricity and phone bills and any other relevant evidence to prove your expenses.
Talk to your accountant
If you are not sure which method to calculate work from home expenses will be best for you, contact dmca to discuss your circumstances. For example, if you work from home a lot you could choose the ‘actual cost’ method where you only need a 4-week diary for the year, however there may be capital gains tax implications (if you work from your own home and not a rental) when you sell the property.