Working from Home Deductions are Changing

If you’re back working from home this year there’s some important tax changes you need to be aware of for your 2023 tax return, so please read on!

Most of us have been working from home in some capacity over the past few years, whether it has been a few hours here or there to send some emails or it’s now a full time arrangement. This has meant you have been eligible to claim a deduction for costs associated with working from home using a fixed hourly rate and in some cases other expenses like phone and internet.

What’s Changing?

The ATO have recently proposed some changes to the working from home deduction rules. There will be one fixed rate option of67 cents per hour that covers the following expenses:

  • energy expenses (electricity and/or gas) for lighting, heating/cooling and electronic items used while working from home
  • internet expenses
  • mobile and/or home telephone expenses, and
  • stationery and computer consumables.

The rate per hour calculates the total of your deductible expenses for energy, internet, mobile and/or home telephone and stationery and computer consumables for the income year.

The proposed changes means you cannot claim an additional separate deduction for any of these expenses. For example, if you use your mobile phone when you are working from home and when you are working from somewhere other than your home, your total deduction for mobile phone expenses for the income year will be covered by the hourly rate of 67c per hour. However you will now be able to claim a depreciation deduction for items like office furniture, which were previously included in the fixed rate list of expenses.

Unfortunately, these changes mean many of my clients deductions will be less than in prior years and as a result they may receive a lower refund this year. 

What do you need to do?

The ATO are yet to finalize the changes, however to ensure you maximize your eligibility to claim a deduction for the 2023 tax year I recommend you do the following:

  1. Keep timesheets or a diary of actual hours worked from home from 1 January 2023. An estimate may no longer be accepted by the ATO if you intend to claim a deduction based on the fixed hourly rate.
  2. Keep copies of receipts for all work from home related expensesincluding phone, internet, stationery, computer equipment purchases and office furniture purchases.

The ATO do not expect to finalize their guidelines on working from home deductions until mid-2023 so it’s best to be prepared and have good records to ensure you can claim all eligible deductions. 

If you need advice around your work from home deductions please get in touch.

The material in this article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.