Yahoo Finance Tax experts' warnings for working from home deductions: 'Almost always worse off'
Here's a handy guide of the methods you can use as well as what you can and can't claim.
The Australian Taxation Office (ATO) will be looking very closely at everyone's tax returns this year, especially when it comes to work-from-home (WFH) deductions. Aussies have been able to claim hundreds of dollars since the COVID pandemic if they were doing their job from the comfort of their own home.
But changes were introduced last year and the ATO has warned it won't accept any attempts to game the system. Yahoo Finance spoke to tax experts Harrison Dell and Ben Nash about what you need to be aware of.
"A lot of people are working from the office a lot more now than a couple of years ago in the depths of COVID," Nash explained.
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"But there's more than a few people who have just been claiming the exact same amount [as they were during COVID].
Nash said you need to have logged all the hours that you've worked from home in case the ATO wants to audit you.
"If you've got really high work from home deductions, it's probably likely that the ATO will ask questions because it's one of the things that they're flagging," Nash explained to Yahoo Finance.
But what would suffice as evidence?
Well, Nash said that's a bit of a grey area because it's hard to prove you've been working from home for a certain amount of hours or days each week. The ATO suggests using a personal diary or timesheet to log all the hours you WFH.
Flat rate vs Actual Cost? Which is better
There are two ways you can claim working from home deductions at tax time.
One is the fixed rate, which is just 67 cents per hour you work from home. It's quick and easy and allows you to have a dollar amount in seconds if you have a consistent work schedule.
This was updated last year from 52 cents per hour and covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed if you use this method.
But Harrison Dell said you're "almost always worse off" if you use the ATO's flat rate system.
He told Yahoo Finance it's better to do the Actual Cost Method, but that forces you to go into much more detail.
The ATO gave some decent examples of what you'd be able to claim if you went down this path:
The decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
Electricity and gas (energy expenses) for heating, cooling and lighting
Home and mobile phone, data and internet expenses
Stationery and computer consumables, such as printer ink and paper
Cleaning your dedicated home office.
But the tax office has noted you cannot claim any deductions, like electricity for example, if there are other household members not working and are in the same room as you.
You can also claim for occupancy expenses like rent, mortgage interest, rates, land taxes and house insurance premiums if your home is your place of business or work and you have a specific home work area.
You will have to have much better-detailed records if you're doing Actual Cost because the ATO will want you to prove every item if something appears out of whack.
What can't you claim?
You've heard a lot about what you can claim and it's up to you and the ATO to work out how relevant each deduction is in your tax return.
But there's a handy list of things you definitely shouldn't include:
Coffee, tea, milk and other general household items, even if your employer may provide these at work
Costs that relate to your children's education, such as equipment you buy – for example, iPads and desks, subscriptions for online learning
Items your employer provides – for example, a laptop or a mobile phone
Expenses where your employer reimburses you for the cost.
You can only claim a work-related expense if you spent the money yourself and weren't reimbursed, or it was related to earning your income and you have a record to prove it.
ATO's warning for your 2023-24 tax return
The ATO won't be letting anyone slip through the cracks this year.
ATO assistant commissioner Rob Thomson explained said they will definitely notice a dodgy tax return if it looks similar to last year's.
"Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to," he said.
"Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records."
Thomson said people will obviously make mistakes here and there but the ATO will know who is making these errors deliberately.
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