As a business owner or professional working from home, you're likely facing the challenge of managing your expenses while ensuring compliance with ATO regulations. Keeping track of deductible expenses and understanding the latest rules can be complex and time-consuming.

This guide is designed to help you navigate the new methods introduced by the ATO for claiming working from home expenses. Learn how to claim your expenses correctly and maximise your deductions by following our comprehensive advice on using the revised fixed rate method and actual cost method.

If you're looking to optimise your tax deductions and ensure compliance and require personalised assistance, contact us today.

What is the revised fixed rate method?

Starting from 1 July 2022, the revised fixed rate method allows you to claim 67 cents per hour worked from home.

What’s covered by the rate?

The new revised Fixed rate method of 67 cents per hour covers:

• Energy expenses (electricity and gas)
• Phone usage (mobile and home)
• Internet expenses.
• Stationery and computer consumables.

Using this method means you cannot claim additional deductions for any expenses covered by the fixed rate.

Important note

Phone usage and internet expenses are included in the fixed rate method. If you use your mobile phone for work both at home and elsewhere, you cannot claim a separate deduction for this use and still use the fixed rate method. If you prefer to claim the actual cost of your mobile phone or home internet, you must use the actual cost method for all your work from home expenses.

Choosing the right method

Consider your personal circumstances to decide whether the revised fixed rate method or the actual cost method is more beneficial for claiming your work from home expenses. If you choose the actual cost method, remember to keep accurate records of your expenses, including energy bills, internet costs, and office equipment purchases.

Eligibility to claim work from home deductions

To claim home office expenses, you must have a dedicated home office.

Compliance Obligations:

• Keep detailed records for all claimed expenses, including receipts, bills, and other documents.
• Maintain a record of the number of hours worked from home during the income year, either the actual hours or a diary kept for a representative 4-week period.
• Document how you calculated the work-related and private portions of the expenses.

Remember, you cannot claim a deduction for expenses reimbursed by your employer.

What’s covered by the fixed rate method?

You can claim 67 cents for each hour you work from home during the relevant income year. This rate covers additional running expenses, including:

• Home and mobile internet or data expenses
• Mobile and home phone usage expenses
• Electricity and gas (energy expenses) for heating, cooling, and lighting
• Stationery and computer consumables, such as printer ink and paper

The 67 cents per work hour includes the total deductible expenses for these running expenses. If you use this method, you cannot claim an additional separate deduction for these expenses.

What is the work from home office requirements?

To claim deductions for working from home expenses, you must meet the following criteria:

• You must be working from home to perform your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls.
• You must incur additional running expenses as a result of working from home.
• You must have records that show you incurred these expenses.

To calculate your deduction for working from home expenses, you'll need to use one of the available methods. If you have running expenses that cover both private and work purposes, you must apportion your deduction and claim only the work-related portion.

How to claim expenses not included in the fixed rate method

You can claim a deduction for the work-related use of technology and office furniture such as chairs, desks, computers, and bookshelves. These items are typically depreciating assets that decline in value over time. Additionally, you can claim the cost of repairs and maintenance for these items. If an item costs $300 or less and is primarily used for work-related purposes, you can claim an immediate deduction for the full cost in the year of purchase. This includes items like keyboards, computer mice, power boards, desk lamps, and chargers.

Claiming immediate deductions for low-cost items

You can claim a deduction for the work-related use of technology and office furniture such as chairs, desks, computers, and bookshelves. These items are typically depreciating assets that decline in value over time. Additionally, you can claim the cost of repairs and maintenance for these items. If an item costs $300 or less and is primarily used for work-related purposes, you can claim an immediate deduction for the full cost in the year of purchase. This includes items like keyboards, computer mice, power boards, desk lamps, and chargers.

Deductions for depreciating assets over $300

For items costing more than $300 or those that are part of a set totaling more than $300, you can claim a deduction for their decline in value over their effective life. Low-cost and low-value assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool using a diminishing value rate. If these depreciating assets are used for both work and private purposes, you must apportion the deduction, claiming only the work-related portion.

Additional deductions for dedicated home offices

In limited circumstances, if you have a dedicated home office, you may also be able to claim occupancy expenses, such as mortgage interest or rent, and cleaning expenses related to the work use of the home office.

Actual cost method

To claim the actual work-related portion of your running expenses, you must have a dedicated home office.

The compliance requirements are as follows:

• Keep detailed records for all claimed expenses, including receipts, bills, and other documents.
• Maintain a record of the number of hours worked from home during the income year, either the actual hours or a diary kept for a representative 4-week period.
• Document how you calculated the work-related and private portions of the expenses.

Remember, you cannot claim a deduction for expenses reimbursed by your employer.