Tax Return:: Working From Home Expenses (Fixed Rate Method)

Hello, this is your tax and super specialist, P&C Tax Professionals.

From the 2023 financial year, the shortcut method will no longer be available meaning that taxpayers will now have to use either the fixed rate method or the actual cost method to account for their work from home expenses. In our blog post today, we will focus on the fixed rate method including the eligibility for the method, how it’s calculated, and the record keeping that needs to be done in order to use the fixed rate method.

<Eligibility>

The eligibility criteria for the fixed rate method are as follows:

> you must have incurred additional running expenses due to working from home

> you must have a dedicated workspace that you use while you are working from home

> you are required to keep records that prove the work-related portion of the expenses that are not included in the fixed rate per hour

> you must keep proper records of the total number of hours you have spent working at home throughout the entire income year.

<How it’s calculated>

For the fixed rate method, you are allowed to claim the fixed rate of 52 cents for each hour you spend working from home. The rate encompasses the following additional running expenses:

> the decline in value (depreciation) of the furniture and furnishings you use for your home office (e.g., desk, office chairs, etc.)

> electricity and gas for heating, cooling, and lighting

> cleaning for your home office

On top of these expenses, you are also able to claim the work-related portion of the expenses listed below which are not included in the 52 cents per hour fixed rate:

> phone, data, and internet expenses (including the depreciation of the handset)

> computer, consumables, and stationery (e.g., printer ink, pens, paper, etc.)

> decline in value expenses for depreciating assets apart from home office furniture and furnishings that are used for work purposes (e.g., computers, laptops, etc.)

<Record keeping for the fixed rate method>

In order to correctly apply the work-related percentage of your working from home expenses, you are required to keep:

> a record that details the number of actual hours you were working from home during the given income year or a 4-week period diary that is representative of your usual pattern of working from home

> receipts or other forms of written evidence that reveal the amount you have spent on the expenses and any depreciating assets you buy for your home office

> phone account statement that shows your work-related phone calls and private phone calls to assist in working out your work-related percentage use for a 4-week representative period

> a diary that confirms

- your work-related internet usage

- the percentage of the year you use your depreciating assets solely for work purposes.

As with all of your other work-related expenses, it is important that you keep appropriate records of the expenses you have incurred throughout the income year in order to save you all the hassle come tax time. For the time being, if you ever need help with getting your tax return sorted, please reach out to us through our official Facebook Page (P&C Tax Professionals – Australia) or by sending us an email to pnctax@naver.com.

Thank you and bye for now!