Tax Update: Work-From-Home Deductions

Updated February 28th 2023

In an attempt to better reflect contemporary working from home arrangements, the Australian Taxation Office (ATO) has announced a major update to the way taxpayers can claim income tax deductions related to work-from-home expenses.

Currently taxpayers can choose from two methods to calculate deductions – either the “actual cost” or “fixed rate” method. Only the fixed rate method is changing.

The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022–23 income tax returns.

Under the new ‘fixed rate’ scheme, taxpayers will be able to claim 67 cents per hour worked from home, up from 52 cents.

This rate covers ongoing expenses like phone bills, internet usage, and electricity expenses incurred while working from home.

Revised fixed rate method

The revised fixed rate method can be used from the 2022–23 income year onwards. The changes are:

Rate

  • The cents per work hour has increased from 52 cents to 67 cents.

What’s covered by the rate

  • The revised fixed rate of 67 cents per work hour 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.

What can be claimed separately

  • The decline in value of assets used while working from home, such as computers and office furniture.
  • The repairs and maintenance of these assets.
  • The costs associated with cleaning a dedicated home office.

Home office

  • The revised fixed rate method doesn’t require taxpayers to have a dedicated home office space to claim working from home expenses.

Record keeping

  • Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document under this method from 1 March 2023.
  • Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.
  • Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses).

Examples of how to apply the fixed rate method are below.

You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year.

If you require assistance to set-up appropriate record keeping processes for yourself or employees, please contact your CIB manager for advice.

Further information about the update is available on the ATO website: https://www.ato.gov.au/Media-centre/Media-releases/ATO-announces-changes-to-working-from-home-deductions/


Fixed Rate Method Application – ATO Examples


Example: no additional deduction as expense covered by fixed rate

Keisha is an employee engineer. During 2022–23, Keisha works from home and uses her timesheets to record the hours she spends working from home.

At the end of the income year, Keisha works out that she worked at home for a total of 843 hours.

When she is working from home, Keisha incurs electricity expenses, internet expenses and mobile phone expenses. However, Keisha also uses her mobile phone for work purposes on days when she is not working from home.

If Keisha uses the revised fixed rate method to calculate her working from home expenses deduction, she can claim a deduction of $564. That is, 843 hours × 67 cents per work hour in her 2022–23 tax return.

Keisha can’t claim a separate deduction in her tax return for the mobile phone expenses she incurs when she’s not working from home as the rate per work hour includes this expense.

If Keisha wants to claim all of her work-related mobile phone expenses, she will need to use the actual costs method to calculate her claim for working from home expenses.


Example: deduction calculated using revised fixed method

Yang is employed as a software engineer. On 6 December 2022, Yang starts working from home 2 days a week and at the office 3 days a week.

On 1 December 2022, Yang buys a desk for $250 and an office chair for $299. Yang only uses the desk and office chair when working from home.

When working from home, Yang uses his work laptop, his personal internet connection and his personal mobile phone. Yang also uses the air conditioner in his spare room to cool and heat the room he works in.

Yang uses a spreadsheet to record the time he starts and finishes working from home. Yang also keeps one quarterly invoice for his electricity expenses, one monthly internet bill and one monthly mobile phone bill for the period between 6 December 2022 and 30 June 2023.

At the end of the 2022–23 income year, Yang decides to use the revised fixed rate method to calculate his working from home deduction. Yang calculates his deduction manually as follows:

  1. Yang uses his spreadsheet to calculate that he worked from home for a total of 560 hours.
  2. Yang calculates his deduction for electricity, mobile phone and internet by multiplying the total number of hours he worked from home by the hourly rate.
    His calculation is:
    560 hours × 67 cents per work hour = $375.20
  3. Yang works out his decline in value deduction.
    As the desk and office chair Yang bought cost less than $300 each and he only uses them when he works from home, he can claim the full cost of the desk and the office chair as a decline in value deduction for the 2022–23 income year.

    His deduction is:
    Chair – $299
    Desk – $250
  4. Yang has no other expenses.
  5. Yang calculates his total deduction by adding the amount he calculated at Step 2 and Step 3. This is calculated as:
    $375.20 + $299.00 + $250.00 = $924 (rounded to the nearest whole dollar)

When he lodges his 2022–23 tax return, Yang includes a deduction of $924 for his working from home expenses.


Example: Representative record of hours worked from home

Wanda has an agreement with her employer to work from home one day a week. She is required to work 8 hours each working day (40 hours per week). Wanda sits at her kitchen table when she works at home and uses her employer provided laptop and mobile phone. Wanda uses her own internet connection and electricity.

Wanda keeps one monthly internet bill and a quarterly electricity bill but she doesn’t keep any records of the hours she spent working from home during the period from 1 July 2022 to 28 February 2023.

Wanda has evidence of:

  • her agreement to work at home one day per week
  • her regular working hours
  • taking annual leave for 2 weeks during the period.

Wanda can use these documents to work out the hours she worked from home during the first 8 months of the year. She works this out as:

Weeks from 1 July 2022 to 28 February 2023 = 34 weeks

34 weeks − 2 weeks (annual leave) = 32 weeks

(32 weeks × 1 day per week) × 8 hours per day = 256 hours

For the period from 1 March 2023 to 30 June 2023, Wanda keeps a record in her email calendar of when she starts and finishes work (including any breaks) on the day she works from home each week. At the end of the 2022–23 income year, Wanda calculates the hours she worked from home during this 4 month period as 129 hours.

Wanda can claim a deduction for her working from home expenses using the revised fixed rate method because she has kept records of:

  • the expenses she incurred which are covered by the rate per hour, that is, her electricity and internet expenses
  • a representative record of her hours worked from home for the period 1 July 2022 to 28 February 2023
  • a record of the actual hours she worked from home during the period 1 March 2023 to 30 June 2023.

Wanda calculates deduction as:

(256 hours + 129 hours) × 67 cents = $258 (rounded up to the nearest whole dollar).


You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year.