The ATO has issued new draft guidelines around a new method (the revised fixed rate method) of calculating work-from-home running expenses from 1 July 2022 (as an alternative to calculating the actual work-related portion of all running expenses).
The new revised fixed rate method will replace both:
■the 52 cents fixed-rate method for electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings,
■the short-cut (COVID-19) 80 cents method (for all additional running expenses).
You are eligible to use the revised fixed-rate method from 1 July 2022 if you:
■work from home to fulfil your employment duties or to run your business (a separate home office or dedicated work area is not required)
■incur additional running expenses that are deductible, and
■keep and retain records of the time spent working from home and of the additional running expenses incurred.
New rate
The new rate of 67 cents (replacing the fixed rate of 52 cents was “based on the Australian Bureau of Statistics (ABS) household expenditure survey with consideration of annual Consumer Price Index (CPI) weightings”. It allowed 52c per hour for each hour a taxpayer worked from their home office to calculate their electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings. In addition, a separate deduction for the taxpayer’s work-related internet expenses, mobile and home telephone expenses, stationery and computer consumables and the decline in value of a computer, laptop or similar device could be claimed.
The revised 67 cent fixed rate under the new rules is inclusive of:
■internet expenses
■mobile and/or home telephone expenses, and
■stationery and computer consumables.
The inclusion of these expenses within the revised fixed rate, when coupled with the current high inflation environment, means that there is a high likelihood that taxpayers may be worse off when moving from 52 cents to 67 cents.
Record keeping
From 1 January 2023, will see the need for you to keep a record of the actual hours worked from home (e.g. timesheets, rosters or a diary kept contemporaneously). This is more onerous than the 52 cent method where you only needed to keep a record to show how many hours you worked from home.
The ATO under the new revised fixed rate method also requires evidence in relation to each of the running expenses listed above.
For energy, mobile and/or home telephone and internet expenses, one bill per item needs to be retained.
If the bill is not in your name, additional evidence is needed to prove that you incurred the expenditure. For stationery and computer consumables, one receipt needs to be kept for an item purchased.
Under the new method, the amount that can be claimed will potentially be lower, while the compliance obligations are higher – the taxpayer not only needs to keep a record of times spent working from home, but also there is a need to keep an invoice/receipt for each of the additional costs, such as an electricity bill.
This is a new requirement which never formerly existed under either of the replaced fixed rate methods. While the new draft guidance offers a transitional arrangement until December 2022, individuals currently availing themselves of the 52 cent fixed rate method will need to consider whether they can meet the additional administrative burden from 1 January 2023, or whether the “actual expenses” method is amore achievable alternative.
Contact Us
If you are uncertain which method is best for you please contact us directly to discuss your circumstances.
Please do not hesitate to get in touch and one of our de Kretser members would love to help you in the right direction.
T: +61 3 9550 6900 E:admin@dekretser.com.au
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