The revised fixed-rate method has emerged as a replacement for the traditional actual expenses method for individuals seeking deductions related to working from home.
Key Features of the Revised Fixed-Rate Method:
Under the revised fixed-rate method, individuals can now claim a deduction of 67 cents per hour for various expenses, including energy (electricity and gas), internet, mobile and home phone charges, as well as expenses related to stationery and computer consumables. However, certain expenses, such as depreciation of home office furniture and personally owned computers, require a more detailed calculation based on actual usage.
Criteria for Claiming Deductions:
To qualify for deductions under the new fixed-rate method, individuals must meet three criteria:
(a) Working from home while carrying out employment duties or business activities on or after July 1, 2022.
(b) Incurring additional running expenses outlined in the deduction rate due to working from home.
(c) Maintaining relevant records for the time spent working from home and the associated running expenses.
Stringent Record-Keeping Requirements:
The revised fixed-rate method introduces strict record-keeping requirements for individuals. For the year ending June 30, 2023, taxpayers must keep records representative of the total hours worked from home between July 1, 2022, and February 28, 2023.
Additionally, records of actual hours worked from home between March 1, 2023, and June 30, 2023, must be maintained. For subsequent years, records of actual hours worked from home for the entire year are mandatory.
Increased Record-Keeping Burden:
In contrast to the previous shortcut and fixed-rate methods, which allowed for estimates, the revised fixed-rate method demands detailed record keeping of actual hours worked from home. This shift significantly increases the record-keeping burden on taxpayers, requiring meticulous tracking through timesheets, rosters, time-tracking apps, access logs, or contemporaneous diaries.
Proof of Running Costs:
Another noteworthy change is the requirement for proof of running costs, such as energy, phone, and internet expenses. Taxpayers using the revised fixed-rate method must maintain at least one monthly or quarterly bill to validate the incurred running costs associated with the 67 cents per hour deduction.
Conclusion:
The introduction of the revised fixed-rate method brings both simplicity and complexity to the process of claiming deductions for working from home. While the method offers a straightforward hourly rate, individuals are now obligated to maintain meticulous records and provide tangible proof of incurred expenses.
As these changes signify a departure from previous practices, you are encouraged to seek further information or clarification from us to navigate the evolving landscape of working from home deductions. Please phone our office on 08 9387 5637 should you have any queries at all.
