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ATO scraps working-from-home shortcut: ‘Keep detailed records’

·4-min read
Woman working from home
To maximise your eligible claim for 2022–23, you'll need keep detailed records of the hours you have worked from home. (Source: Getty)

For the past few years, people working at home have been able to calculate their work-from-home expenses via what’s known as the “shortcut method”.

Introduced by the Australian Taxation Office (ATO) during COVID, the shortcut method allows taxpayers to claim 80 cents an hour work-from-home (WFH) expenses.

The 80-cent, flat-rate method simplified the process of calculating deductions for working from home, but also meant taxpayers couldn’t claim any other expenses, such as purchasing new equipment.

While you can still use this method to calculate your WFH expenses for the 2021-2022 income year, it is due to wrap up on June 30, 2022.

“The shortcut method has provided millions of taxpayers with an easy-to-calculate method of claiming expenses for WFH,” Tax Institute senior advocate Robyn Jacobson said.

“This is because the record-keeping requirement has been limited to maintaining a record of the hours you worked from home, such as a timesheet, roster or diary, and a dedicated work area is not required under this method,” she said.

Unfortunately, those days are over. For the many Australians still working at home, either full time or a couple of days a week, you’ll have to get acquainted - or reacquainted - with either the fixed rate method or the actual cost method.

Here’s how these two methods work.

Fixed rate method

Using this method, you can claim a fixed rate of 52 cents for each hour you worked from home.

This rate covers the expenses incurred through the decline in value of home office furniture, electricity and gas for heating, cooling and lighting, and cleaning.

You can also separately claim for the work-related component of other expenses, such as phone, data and internet and the decline in value of depreciating assets, such as your laptop.

But there are a few caveats. Firstly, you have to have a dedicated work area in your home.

You’ll also need to start keeping records.

You’ll need to be able to show exactly how many hours you spent working at home from the whole income year.

For the expenses not covered in the fixed rate - such as phone and data usage - you’ll also need to work out exactly how much can be apportioned to work-related costs, down to the hour.

Jacobson said this could be “very difficult” since most people did not receive itemised bills anymore.

“And there are significantly greater volumes of downloads in homes these days for personal use, such as streaming TV shows and movies,” she said.

She also said the rate of 52 cents may no longer be appropriate in light of rising costs for power and gas.

Jacobson said the ATO was reviewing the fixed rate method to see if it was still appropriate as working habits evolved.

The actual cost method

Under the actual cost method, taxpayers work out their deductions by calculating the actual expenses they incur to produce their income when working from home.

This includes cleaning expenses, heating, cooling and lighting costs, phone and data costs, as well as depreciating assets, such as computers.

This method also requires stringent record-keeping because taxpayers may be asked to provide receipts to substantiate any claims if they later decide to use the actual cost method.

Jacobson also said taxpayers needed to be aware of claiming running expenses when working from the same room as family or household members who were not working from home (such as the lounge room).

Basically, this means you can’t claim those running expenses.

“Only minimal expenses are usually claimable using the actual cost method if you don’t have a dedicated work area,” Jacobson said.

Jacobson said the WFH deductions could be confusing for taxpayers.

“Remember that any guidance the ATO provides in relation to claiming deductions for WFH from July 1, 2022 should be distinguished from claims you plan to make in your 2022 tax return,” she said.

“The best tip to maximise your eligible claim for 2022/23 is to keep detailed records of the hours you have worked from home using a timesheet, roster or diary - you could even use a spreadsheet - and all your receipts for your work-related purchases for working from home.”

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