An Employee’s Guide to Recording Work From Home Expenses.
The Home Office. How to record Working From Home Expenses.
The Australian Taxation Office has recently updated their guidance for employees claiming home office expenses. Here’s what you need to be aware of when claiming home office expenses in your Income Tax Return.
COVID shutdowns changed the way many employees work, with working from home, for at least part of the week, now very common.
From the start of the pandemic until 30th June 2022, the ATO had introduced a special shortcut method for people working from home. This covered electricity, gas, internet, phone, equipment etc. With the shortcut method now removed, the following sets out the ATO’s view on claiming expenses.
Eligibility to Claim Expenses
Firstly, in order to be able to claim expenses for working from home, you must:
- Be working from home to fulfill your employment duties, not just carrying out minimal tasks such as checking emails or taking calls
- Incur additional running expenses as a result of working from home (e.g. electricity, gas, internet, phone, stationery, furniture and equipment)
- Have records that show you incur these expenses.
Claiming Method 1 – Fixed Rate Method
Under the fixed rate method, you multiply the number of hours you worked from home by the ATO’s stated hourly rate.
The rate from 1/7/2022 is 67c per hour. This rate is to cover the expenses for internet, phone, electricity, gas, stationery and computer consumables (e.g., ink and paper). If you use this method, you do not claim any of these expenses on top of the 67c per hour.
Other items such as office furniture and computer purchases can be claimed in addition to this rate.
The record keeping that the ATO expects for this method is:
- A record of the number of actual hours worked from home, for example, a timesheet, roster or diary.
- At least one record each year for the additional running expenses you incur that the rate per hour covers. That is, keep one electricity bill, one stationery purchase, one phone, one internet etc.
As a concession for 2022/23, as the guidance has only recently been issued, rather than keeping a time sheet, roster or diary for the period ending 28th February 2023, you can apply a representative record of hours worked for the period 1st July 2022 to 28th February 2023. For example, if you regularly work one day per week at home, for eight hours per day and took two weeks leave between 1st July 2022 and 28th February 2023, then you can estimate the hours to be 32 weeks x 8 hours = 256 hours.
Claiming Method 2 – Actual Cost Method
Under this method, you claim the work-related portion of the expenses incurred as a result of working from home. Under this method you must keep the records for all the expenses incurred, details of how the deduction amount was calculated and either a record of the actual hours worked from home during that year, or a four week period that represents your usual pattern of working from home.
As an example, the ATO’s guidance on some of the common expenses is as follows.
- Electricity and gas for heating, cooling and lighting. Take the cost per unit of power as shown on the utility bill, average units you use per hour for each appliance, equipment or light used and then multiply by the hours of work related use.
- Phone and internet. If you receive an itemised bill, calculate the work related use over a four week period and apply this to the whole year. If the bill is not itemised, then keep a diary record for a representative four week period showing the use of the phone or internet.
As you can see, the ATO has quite a high record keeping requirement for home office expenses.
If you have any queries, please email: firstname.lastname@example.org and we will be in touch, alternatively, contact your Accountant directly.