Working from home can come with a whole new world of record keeping and tax deductions. Chartered accountant GAIL FREEMAN guides a client through it.

Chelsea has a new job. It requires her to work from home and she’s come to see me about the record-keeping rules.

I congratulated her on the new appointment and for checking the working-from-home rules before she started.

In February 2023 the ATO issued a Practical Compliance Guideline setting out the rules for claiming additional running expenses for working from home.

I told Chelsea there were two methods of claiming working-from-home costs, namely actual costs or the fixed-rate method, which is currently set at 67 cents an hour.

“The important things to know are that the fixed rate covers energy costs, internet costs, phone costs and stationery costs,” I said.

“It does not cover depreciation on electronic devices or office furniture. Unlike previous ATO requirements you do not need to have an area set aside as an office.

“Not being able to claim your phone and data usage reduces your record keeping. However, if you only work one day a week from home and use your phone a lot, it may be preferable to claim the phone and use the actual rate.

“We can make that decision when we prepare your tax return next year.”

I told her that other than the claims restrictions, if she elected to use the fixed rate, the record-keeping rules were the same.

“You have to keep records which show the total number of hours that you worked from home and you need an invoice which shows that you have a responsibility to pay the energy costs,” I said.

“You have to keep records for the entire year that show the number of hours that you actually worked from home. An estimate is not acceptable.

“Records include time sheets, rosters, time logs for accessing your employer’s online systems, a time-tracking app or a diary record showing each day that you worked from home and the starting and finishing times.”

Chelsea said that seemed like a lot of work.

“Yes it is but it can be a significant deduction for you,” I assured her.

“I also want to tell you about the records you need to keep if you depreciate a computer or printer that you use for work and which is not provided by your employer.

“The tax invoice for purchase must contain the name and address of the supplier, the cost of the item, a description of the item, the date that you acquired the item and the date that the record was completed.

“It must also be in English. You need to keep a log for at least one month that shows all your computer usage split up as to business and personal.

“Once you have a percentage for each, for example 60 per cent for work and 40 per cent personal, you depreciate the cost of the computer at the rate of 50 per cent then apportion 60 per cent of that to claim your deduction.

“You should check the percentage each year, so you will need to keep the records for at least one month each year and then extrapolate that across the year.

“I should also remind you that you need to keep records of expenses for five years. However, in the case of depreciable items, the five years runs from when you stop depreciating the item.”

Chelsea left saying she now felt confident of what records she needs to keep.

If you need help with record keeping or any other tax matter, contact the experts at Gail Freeman & Co Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.