Insights
Planning to continue working from home in 2022-23?
If you normally work in an office, you might not be aware of some of the tax benefits you can claim by working from home!
If you are a hybrid or fully remote worker, it’s time to start collecting those receipts and keeping track of the time spent in your PJs in front of a work computer – there are serious tax benefits for those that do some basic admin throughout the year.
An important change for 2022/2023:
The ATO is removing the “Shortcut” method for calculating work from home deductions in the 2022/2023 financial year. The popular shortcut method created a single hourly rate of 80 cents to be applied per hour worked at home.
This change means that workers will need to keep detailed receipts and supporting evidence for all costs relating to working from home expenses. It also means that a simple, bundled-up hourly rate for ALL of the costs of working from home (heating, cleaning, depreciation, internet, mobile phones etc.) will no longer be available come 1 July 2022.
Benefits of the new approach – keep accurate records!
While detailed records will need to be kept to support all claims made, it is likely that using either of the two approved methods for claiming work from home expenses will result in a higher deduction for your tax return this time next year. So that’s a real pro for workers able to work from home in 2022/2023.
So what can you claim from 1 July 2022??
With increased numbers of employees working either fully remote, or in hybrid working from home arrangements, many more people will need to understand how to claim working from home expenses in the new financial year. You can still claim costs incurred in working from home; and there are two methods allowed for calculating your working from home deductions:
Option 1 – Actual Cost Method:
As the name suggests, this method enables you to claim deductions for the actual costs incurred as a result of working from home.
To apply this method, you’ll first need to calculate the percentage of your home that you use as your workspace. This percentage will be applied to the work-related costs of running your household – things like electricity, cleaning, gas, phone and internet.
You will also need to demonstrate – via a diary – the typical number of hours worked from home over a typical four-week period to substantiate your records. This will be used to calculate a work-related percentage, which can be applied to phone and internet costs.
Finally, you’ll need to keep receipts for consumable and depreciating items, such as office furniture and fitout, or stationery and printing costs. You can only claim the work-related portions for each expense.
Our tip: It’s important to remember that you can only claim the additional costs for things like lighting, cleaning and cooling, that are incurred as a result of you working from home – so, for example, if your family are using the same space as you use for work, the costs for electricity, heating and internet are not considered additional or exclusive to you working from home. If you don’t have a dedicated work area, you will generally only incur minimal additional running expenses.
Option 2: Fixed Rate Method:
If calculating individual costs for additional expenses incurred in working at home isn’t for you, the fixed rate method allows you to apply a fixed rate of 52 cents per hour to cover things like cleaning, electricity and gas, and depreciation costs for your home office. You will need to keep records of the total number of hours spent working at home for the year, if you choose this method of deduction.
On top of the fixed amount, separate claims can be lodged for home internet, mobile phone costs, and any other expenses that relate directly to work done at home. These expenses can only be claimed for the work-related portion of your bills. So you will need to provide calculations and proof of how the ratio of costs have been calculated, over a typical 4-week period.
The types of deductions that you can claim would include – mobile phones, home internet, stationery, printer inks etc., but you can only claim a representative proportion of the costs used for work-related activities.
If you use this method, it’s essential that you have a dedicated work area, like a home study, that you use for working from home.
Our tip: It’s important to remember that you can only claim the additional costs for things like lighting, cleaning and cooling, that are incurred as a result of you working from home – so, for example, if your family are using the same space as you use for work, the costs for electricity, heating and internet are not considered additional or exclusive to you working from home. If you don’t have a dedicated work area, you will generally only incur minimal additional running expenses.
Our tips for keeping those administrative records!
You will need to get your administrative skills into action, to ensure that your Modoras accountant can apply for the maximum deductions next tax season.
The key rule is that if you can’t prove the costs were incurred – either through diary records, receipts, logbooks or similar; then you can’t claim the deduction. Bank statements don’t contain enough info to satisfy the ATO, so you’ll need to keep the actual invoices for all of your claims.
The ATO has released a fantastic My deductions app (available from Google Play and App Store) to help manage your record keeping each year. It’s a great way to keep your deductions filed in one handy place.
Some of the other tools you can use to record your working hours include:
- Your timesheets and work rosters
- Your diary or calendar
- This handy Moneyclip Working from Home diary
Our biggest tip though is to start keeping records now! Don’t assume you can put it off and be able to backdate the records next June.
Are You Ready for Tax Time?
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Gather your tax time documents and receipts, and book an appointment with a Modoras Accountant or call us on 1300 888 803. Tax time has never been so exciting because with planning… your lifestyle potential is just the beginning.
Want to know more?
We’ve put together End of Financial Year FAQs to help you maximise tax time benefits. We know that there isn’t a one-size-fits-all solution to accounting, wealth management and business growth. So we’ve also outlined some tax-effective strategies that you may benefit from. We can help you find what strategies are right for you and/or your business. From tax tips, checklists, fact sheets and more, click here to take a look at the Modoras Tax Time page.
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IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.
