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Wfh Tax Claims Explained How The Fixed Rate Method Works
As of July 1, 2022, the fixed rate method for calculating your deduction for home office expenses has been revised to better accommodate the needs of those working from home.
The changes include an increase in the hourly claim rate, changes to the expenses the rate covers and the type of record keeping required.
And the best change? You don't need a dedicated home office in order to claim WFH expenses!
Basically, you can claim up to 67 cents for each hour you work from home during the income year.
This covers numerous additional running costs including home and mobile internet, mobile and home phone usage, electricity and gas, and stationery and computer consumables such as printer ink and paper.
Remember: If you decide to use this method, there is no option to further claim additional deductions for these specified expenses.
But: You can still claim deductions on any technology or office furniture you use that aren’t included in the fixed rate.
Think office chairs, desks, computers, and bookshelves, which are considered depreciating assets.
Repair and maintenance costs of these depreciating assets can also be claimed independently.
If these items cost $300 or less and are primarily used for work, you can claim an immediate deduction.
If these items cost more than $300 individually, or as part of a set, then deductions are calculated over the effective life of the item.
How does the Fixed Rate Method work?
Keisha, an engineer, works from home for a total of 843 hours in the income year.
Under the revised fixed rate method her deduction would be around $564 (843 hours x 67 cents per work hour).
She cannot then claim a separate deduction for her phone expenses as these are included in the revised fixed rate.
To calculate your home office expenses, you can use a home-office expenses calculator to work out your deduction.
Or you can calculate your deduction manually by:
Determining the total number of hours you've worked from home
Multiplying the total number of hours worked from home during the year by 67 cents per hour.
Calculating the work-related decline in value of any depreciating assets used during the year.
Working out the amount of any other work-related home expenses you incurred that the rate per hour doesn't cover.
Finally, adding steps 2, 3 and 4 to calculate your total home office deduction.
You need to keep good records if you use the Fixed Rate Method method.
The Bottom Line
Make sure maintain records of the actual number of hours you worked from home for the income year, as well as all additional running costs you incurred. You'll need to keep these records for at least five years from the date of lodging your tax return.
Important: Especially for the 2022-23 financial year, ensure there is a representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023, and a record for the actual hours worked from home from 1 March 2023 to 30 June 2023.
The ATO's myDeductions tool can help you keep track of your expenses and receipts throughout the year, making lodging your tax return simpler and more streamlined.
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
