Chartered accountant GAIL FREEMAN shares an insight into the prospective new, arduous rules around claiming working-from-home expenses.

The rules for claiming home office expenses have changed and we were only just notified of this.

A draft tax ruling was issued, which contains many surprises. Remember this is only a draft. However, I’d recommend you start keeping records in accordance with this draft now.

Until June 20, 2022, you had the choice of claiming 80 cents an hour, 52 cents an hour or actual costs depending on your circumstances. According to the draft ruling, effective from July 1, 2022, unless you claim the actual-costs method, your only option is to claim 67 cents an hour, with a number of caveats. 

The ruling is very specific that this is a claim for additional running expenses incurred in working from home that relate to earning your income. They must be either related to your employment or running your business.

One significant change is that you do not need an area specifically set aside to make a claim. If there is more than one person working from home each person will be able to make a claim provided that they each satisfy the requirements and they can even use a different method for claiming. However, I am only looking at the 67 cents method in this article.

Now, this is where it gets interesting: 67 cents an hour includes internet, energy, phone and stationery. You can claim depreciation on your computers and other relevant items in addition to 67 cents an hour. And the sting in the tail? If you use your phone when working from home and in the office to earn your income you have no additional claim as it is included in the hourly rate claim. This could be quite disadvantageous.

The draft states that when the invoice is in one person’s name but three or four people share the energy costs, additional records are required to show that you contributed to the expenses. This could be tricky and if adult kids live with their parents and don’t pay board they won’t have a claim because they did not contribute to the expenses. 

In the current year (2022-2023), you have to keep different records for the first six months and the second six months. 

So, from July to December, you needn’t keep a record that is representative of the total number of hours worked during the six-month period. 

From January 1, 2023, you actually need a record of the total number of hours worked from January to June. For subsequent years you need to keep a record of the number of hours you worked from home during that income year. A list of days with eight hours per day will not be good enough and estimates are not acceptable.

You need proof of additional running expenses. You must keep one monthly or quarterly bill for internet, phone and energy. For stationery you must keep one receipt for an item purchased. You also need to have records to show the work-related use of depreciable assets for a four-week period so that the correct percentage can be claimed.

Yes, this seems arduous and it is just a draft, but trying to claim the actual usage method and do the necessary apportionments will likely be worse and, in my experience, generally produces a smaller deduction.

If you need help with the latest ATO information contact the friendly team at Gail Freeman & Co on 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.