Tax Time 2024 - claiming working from home expenses refresher

The ATO has flagged incorrectly claimed work-related expenses as a particular focus area for Tax Time 2024.

More than 8 million taxpayers claimed a work-related deduction in 2023, with around half of those claiming a deduction related to working from home costs. "Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’.

Your deductions will be disallowed if you’re not eligible or you don’t keep the right records." – ATO Assistant Commissioner Rob Thomson There are two methods for calculating work from home expenses: the actual cost method and the fixed rate method.

Both methods require a taxpayer to keep detailed records and follow the ATO's 3 golden rules: the money must have been spent by the taxpayer without reimbursement, the expense must be directly related to earning their income, and the taxpayer must have a record to prove the expense (eg a receipt). The two methods can’t be used in combination – a taxpayer needs to pick one or the other each year – so it’s important to consider which method will best suit your individual circumstances.

To be eligible to claim working from home expenses by either method, when working from home a taxpayer must be fulfilling employment duties (not just minimal tasks like taking calls or checking emails); incur additional running expenses as a result of working from home (eg increased electricity or gas costs for heating/cooling or lighting); and keep detailed records showing how these expenses were incurred. The actual costs method works by calculating the additional costs incurred while working from home. Taxpayers must keep records showing either the number of actual hours worked from home during the entire income year (eg a timesheet or spreadsheet); or a record, like a diary, for a continuous 4-week period that represents their usual working from home pattern.

The taxpayer also needs to keep records (receipts, bills, and other documents) to prove what additional running expenses were incurred in working from home and how they worked out the amount of their deduction. Expenses can include the decline in depreciating assets (eg office furniture, computers); heating/cooling and lighting; home and mobile phone, data and internet costs; stationery and computer consumables; and cleaning of a dedicated home office.

Where running expenses are incurred for both private and work purposes, the taxpayer must apportion the expenses and only claim the work-related portion as a deduction. Fixed rate The ATO revised the fixed rate method for calculating a working from home deduction in 2023, and the changes are now in full effect for the 2023-24 financial year.

As with the actual costs method, taxpayers choosing to apply the fixed rate method must have detailed records of the total number of hours worked from home (eg diaries, calendars, or spreadsheets) and the expenses incurred (eg copies of electricity or internet bills), and also have records for expenses the fixed rate per hour doesn't cover that show the work-related component of those expenses.

The claimable fixed rate of 67c per hour while working from home covers all the additional running expenses incurred by the taxpayer for home and mobile internet or data expenses; mobile and home phone usage; energy expenses (eg electricity/gas for heating/cooling and lighting); and stationery and computer consumables (eg printer ink and paper). It is important to remember that a taxpayer can't claim additional separate actual cost deductions for these expenses.

However, they can separately claim a deduction for the work-related portion of depreciating assets (eg chairs, desks, computers) that are used for both work and private purposes.