Figure out which method is best for you
When claiming working-from-home expenses, it’s all about working out which method applies to your circumstances, then determining which gives you the best outcome. To use any method, you must meet the working criteria and record keeping requirements.
Fixed cost method
The revised fixed rate of 67 cents per work hour covers energy expenses (electricity and gas), phone usage, internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed if you use this method. You can separately claim the decline in value of assets used while working from home, such as computers and office furniture, and other expenses not covered by the rate.
Actual Cost Method
Alternatively, the actual cost method is available to taxpayers to claim their work from home expenses. As opposed to the fixed cost method where you claim 67c per hour worked from home, the actual cost method involves claiming the actual cost you incurred for items like phone, internet and electricity while working from home.
Whichever method you choose, there is some record keeping required. The type of records you need to keep will depend on which method you use to calculate your expenses.
To claim a deduction using the revised fixed rate method, you will need records of:
• the actual hours you worked from home, kept at the time they occur
• evidence for the expenses covered by the rate that you incurred, e.g., if you incurred phone and electricity expenses you will need to keep one bill for each
• items and expenses you claim as a separate deduction (not covered by the revised fixed rate).
For the actual cost method, you will need to keep detailed records of all expenses being claimed.
Items Costing Over $300
No matter which method is used, if you purchase assets and equipment for work and it costs more than $300, you can’t claim the full amount immediately. For each of these items, the deduction must be claimed over a number of years (known as decline in value or depreciation). You can claim immediate deductions for equipment valued up to $300.
What You Can’t Claim
Be aware there are some expenses you can’t claim under either of the methods. These include the cost of items used for children and their education, expenses or items your employer pays for (or reimburses you for), and things like tea or coffee for your working-from-home kitchen. An employee working from home generally can’t claim occupancy expenses such as mortgage interest and rent either.
You’ll Need to Apportion Expenses Correctly
An important tax return tip is to only claim for the work-related percentage of expenses.
Apportionment is very important because you can only claim the work-related portion of an expense.
If you use an item, such as a laptop or printer, for both work and personal use, you need to apportion the cost between the two, no matter whether you’re claiming an immediate deduction or depreciating the asset. For example, if you buy a printer for $295 that you use 80% of the time for work and 20% for private use, you can claim an immediate deduction for $236.
Generate Additional Deductions
If you prepare ahead of the end of the financial year, you can generate some additional deductions, that will give your tax return a welcome boost. These tax return tips include:
• paying any professional or union fees due June 30 to claim the deduction for the whole amount this year.
• claiming charitable donations over $2, as long as you have a receipt and the charity is registered as a deductible gift recipient.
• if you have some spare cash, making a personal contribution into your super fund, provided this doesn’t mean you’ll exceed $27,500 for the year (including employer contributions). The payment must be made by June 30 and you need to submit a Notice of Intent form with your super fund. Then you need to receive acknowledgement from your fund before you claim the deduction in your return. You can find a standard form on the ATO website. Please contact your financial adviser to get the best possible outcome.
Small Business Support – $20,000 instant asset write-off Electric cars exemption
On 9 May 2023, as part of the 2023–24 Budget, the Australian Government announced it will improve cash flow and reduce compliance for small businesses by temporarily increasing the instant asset write-off threshold to $20,000, from 1 July 2023 until 30 June 2024.
This measure is not yet law.
Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
Electric cars exemption
From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses.
The new of the Fringe Benefits Tax (Assessment) Act 1986 provides that a car benefit is an exempt benefit in relation to a year of tax if:
- the benefit is provided in the year of tax in respect of the employment of a current employee; and
- the car is a zero or low emissions vehicle when the benefit is provided; and
- the value of the car, at the first retail sale must be below the luxury car tax threshold for fuel efficient cars, — which is $84,916 for the 2022-23 income year