ATO changes to working from home deduction

The Australian Taxation Office (ATO) has announced a refresh to the way individual taxpayers can claim working from home deductions under the ‘fixed rate’ or ‘shortcut cents per hour’ method.

While the actual cost method remains unchanged, the fixed rate method has been updated to include a rate drop from 80 cents per hour to 67 cents per hour, which applies from 1 July 2022. Taxpayers are also required to keep significantly more detailed records from 1 March 2023 to claim under the new rules.

During COVID-19, the shortcut fixed rate per hour was 80 cents and taxpayers were required to keep a record of either:

  • The number of actual hours worked from home during the income year or
  • A continuous four-week period that represented their usual pattern of working at home.

Claims under the shortcut method during COVID-19 covered all running expenses and depreciation on assets used for work purposes at home.

This method has now been revised for the current income year (i.e. the year from 1 July 2022 to 30 June 2023) and future years. To claim the new 67 cents per hour rate in the current year, from 1 March 2023, taxpayers must retain:

  • One representative receipt, invoice or other written evidence for each type of additional expense incurred by the taxpayer each year in relation to working from home (e.g. electricity, gas, phone, internet, computer consumables and stationery)
  • A record of all hours worked from home. The ATO will no longer accept estimates or a 4-week representative diary.

There is no set format that the record of hours worked at home must take. The records can be timesheets, rosters, logs of time spent accessing an employer or business system or a diary for the full year.

The new fixed rate does not cover depreciation on assets used when working from home, such as monitors, desks, chairs, etc. Deductions for these expenses must be claimed separately, based on documents indicating the asset’s cost and the proportion of work-related use.

For more information on the changes to claiming work from home deductions, please contact your BDO tax adviser.