ATO rule changes force workers to re-examine their tax deductions

Tax deductions for people who work from home have been tweaked by the ATO, and it comes with a valuable warning.

Tax deductions for millions of Australians still working from home have been overhauled, and workers are being urged to understand what delivers them the biggest refund.

The Australian Taxation Office last year scrapped its 80c per hour shortcut method introduced during Covid, and has now revamped one of the two remaining deduction options to “better reflect contemporary working-from-home arrangements”.

ATO assistant commissioner Tim Loh said taxpayers could choose from two ways to claim working-from-home deductions – either by claiming actual costs or a revised fixed rate method.

He said only the fixed rate method was changing, expanded from 52c to 67c per hour worked but now including phone, internet, stationery and computer consumables that previously could be deducted separately.

Tax specialists say the changes will cause confusion and mistakes on this year’s tax returns, but Mr Loh said transitional rules were in place for a majority of 2022-23.

ATO assistant commissioner Tim Loh says people no longer need a dedicated home office to use the fixed rate method.

“From 1 July 2022 to 28 February 2023, we’ll accept a record which represents the total number of hours worked from home – for example a four-week diary,” he said.

“From 1 March 2023 onwards, taxpayers will need to record the total number of hours they work from home.

“Assets and equipment that typically give taxpayers a bigger deduction, such as technological items and office furniture, are not included in the revised rate and need to be claimed separately.”

The actual cost method remains, where people simply claim all their work-related portion of home office expenses.

“No matter which method you use, make sure to keep records,” Mr Loh said.

H&R Block director of tax communications Mark Chapman said many people could lose out using the new fixed rate method.

“A typical individual stands to claim deductions of about $750 using the new 67c per hour fixed rate whereas for the same expenses they would have been able to claim $1379 under the old regime,” Mr Chapman said.

This was mainly because mobile phones are included in the new fixed rate but were claimable separately under the old 52c rate.

Mr Chapman said people should seek tax advice if they worked from home, and beware of making incorrect claims: “keep a complete log of all hours worked at home, and keep bills for all items”.

Originally published as ATO rule changes force workers to re-examine their tax deductions