Employees working from home (WFH) need to familiarise themselves with new changes introduced by the Australian Taxation Office (ATO) on calculation methods for claiming tax deductions, according to HLB Mann Judd Sydney tax consulting director, Bill Nussbaum.
The warning comes ahead of the 31 October general deadline for the lodgement of self-prepared individual income tax returns.
Mr Nussbaum said in the wake of COVID, the ATO introduced a simplified short-cut method for claiming WFH expenses, whereby taxpayers were able to claim 0.80c per hour. However, this will not be available for the 2023 year.
“Taxpayers wishing to claim a WFH deduction can now only use the pre-existing fixed rate or actual cost methods. A lot of people won’t be aware of the changes which is concerning given the ATO has indicated work-related expenses are an area of focus this year,” he said.
The ‘fixed rate method’ has been available for a number of years, however the rate claimable has increased from 0.52c to 0.67c per hour WFH. This method takes into account the running expenses when WFH, such as home and mobile phone and internet costs, electricity, gas and consumables, such as stationery items and other office equipment.
The ‘actual cost method’ is based on the real cost incurred, and while it can result in a higher deduction, it can be more technical and cumbersome.
“Most people WFH will apply the ‘fixed rate method’ as it’s more straight-forward. However, the 0.67c rate per hour is intended to cover a lot of expenses so you can’t then claim expenses in addition to this. Some may inadvertently claim expenses twice.
“The ‘actual cost method’ calculation requires a more granular level of detail, such as cost per unit of electricity, for example. This method also requires taxpayers to be maintain records of various expenses during the year, and work-related usage,” he said.
The ATO has stated that for calculating the actual cost method, taxpayers can work out work-related expenses using records for the entire year or over a four-week period that represents their pattern of work usage, in determining a percentage of costs.
Other tax lodgement considerations include claiming on depreciation of assets in WFH duties, which can include a new desk, chair and any other equipment required, this is in addition to using the 0.67c fixed rate method. It is also available for the actual cost method.
For anyone running a business from home, there are also occupancy costs, such as rent or mortgage repayments, council rates, insurances, water and land taxes.
“However, it’s important to be aware that if you do claim occupancy expenses, there will be CGT implications when you sell the property.
“Evidently, there are a number of areas for taxpayers, particularly those WFH, that need to be assessed in the lead up to the tax deadline. People should familiarise themselves with the changes that impact them, and if they are still unsure, seek advice from a qualified tax professional,” said Mr Nussbaum.
