The Australian Taxation Office confirmed on 16 February 2023 the changes to its approach when employees claim working from home expenses. PCG 2023/1 replaces PS LA 2001/6 and PCG 2020/3 and closes the door on simpler (tax) times.
Since COVID, employees have had the choice between:
- The actual (percentage of floor space) method
If you have a dedicated workspace, you can claim a deduction for your business overheads, and a percentage of your home expenses.
Each financial year, you need to keep a 4-week diary of hours worked at home, as well as all receipts.
- The fixed rate (cents per hour) method
You can claim a deduction of $0.52 per hour that you work from home. You can also claim an additional deduction for business overheads and home depreciation costs.
Each financial year, you need to keep a 4-week diary of hours worked at home.
- The shortcut (COVID times) method
You can claim a deduction of $0.80 per hour that you work from home.
Each financial year, you need to keep a full detailed record of dates and hours worked at home.
The Australian Taxation Office has now removed these last two methods and replaced them with the following:
- The revised fixed rate method
You can claim a deduction of $0.67 per hour that you work from home. You can also claim an additional deduction for decline in value of assets, utilities and home depreciation costs.
Each financial year, you need to keep a full detailed record of dates and hours worked at home (from 1 March 2023 only). For the period 1 July 2022 to 28 February 2023, you need to have kept a 4-week diary of hours worked at home.
So here is an overview of the situation:
If you think the above is complex, be assured that this is only the tip of the iceberg! For instance, some occupancy costs (rent, mortgage interest, insurance, rates) are also claimable if your employer does not provide you with an alternate work location. However, this can have capital gains tax consequences if you own your home. In short, an overly complex system for taxpayers to navigate on their own!
Now that the ATO has finalised their new guidelines, we expect that the additional record-keeping effort will reduce the number of taxpayers caring to claim these expenses going forward…
