If you spent time working from home since COVID-19 entered our lives you may have utilised the Australian Taxation Office (ATO) shortcut method to claim a deduction in your tax return. This shortcut method allowed you to claim a deduction for hours worked from home at 82 cents per hour to include:

• energy costs
• internet
• telephone
• decline in value of equipment and furniture

This shortcut method comes to an end with 2022 financial year tax returns. For deductions related to the current financial year (from 1 July 2022) onwards the ATO have released some draft guideline. These draft guidelines are currently open for comment.

The release of these new guidelines indicates a renewed interest by the ATO for inappropriate or excess home office claims. It is important to follow the ATO guidelines to ensure you are not denied your claim.

The new guidelines outline potential deductions available from 1 July 2022 as follows:

1. Actual expenses

There is no change to this previously available method which incorporates actual costs incurred for:

1. energy costs
2. internet
3. telephone
4. decline in value of equipment and furniture
5. stationery and computer consumables
6. cleaning

The tax office provide some guidance on reasonable methods of working out the portion of these costs that relate to you working from home: Actual-cost-method.Further information regarding deductible working from home costs and how they should be calculated are outlined in Taxation Ruling TR 93/30 Income tax: deductions for home office expenses.

1. Revised Fixed Rate

Under this method a deduction of 67 cents per hour can be claimed which incorporates a deduction for the following home office running costs:

1. energy costs
2. internet
3. telephone
4. stationery and computer consumables

We note the fixed rate now incorporates an allowance for stationery and computer consumables and no longer allows for a decline in value of equipment and future. When using the revised fixed rate amount to calculate a deduction you are also entitled to claim an additional deduction for depreciation in the value of any assets purchased for home office use (eg. desk or computer).

If using the revised fixed rate method, it is important that:

1. The taxpayer is “working” from home.Doing minimal tasks such as occasionally checking emails or taking calls will not be considered “working” from home.
2. The costs are actually incurred (eg. costs are NOT incurred if they are reimbursed by the employer, or the taxpayer lives with their parents who pay all household bills).
3. Records are kept regarding the:
   1. number of hours worked from home with proof such as timesheets, rosters, diary or similar documents.
   2. household bills incurred and being able to provide at least one bill applicable to the relevant financial for each of the above-mentioned running costs.

For further details please refer to the full draft ruling - PCG 2022/D4

We will advise once the draft guidelines have been finalised. In the meantime, if you have any questions or concerns, please contact the Power Tynan team.