Since the impact of COVID-19, millions of Australians are working from home. This means that all these people want to claim a tax deduction for working from home expenses.
The ATO now accepts two methods for claiming for WFH deductions.
The first is the actual expenses method. This is where you keep all of your records and work out what the additional costs of working from home are actually costing you. Usually this is done by taking a portion of the floor space you use in your home for your income producing (work) activities.
The other method is what is known as the “revised fixed-rate method”. This is where you keep records of the amount of time you work at home and multiply the number of hours by 67 cents. This is the amount you claim in your tax return. This is set out in practical compliance guideline PCG 2023/1.
This PCG allows you to claim under the revised fixed-rate method the expenses for:
- Energy expenses
- Internet expenses
- Mobile and home phone expenses
- Stationery
- Computer consumables
But, there can be a problem with using this method if you get it wrong for some reason or if the ATO thinks you’ve got your calculations wrong.
The PCG says at [6]:
“…if you lodge an 𝗼𝗯𝗷𝗲𝗰𝘁𝗶𝗼𝗻 in relation to your working from home expenses for whatever reason, you cannot rely on using the revised fixed-rate method in this Guideline to determine whether you are entitled to a deduction for your expenses. Only the actual expenses you incurred as a result of working from home and for which you have adequate records will be allowed as a deduction.”
This includes an objection that is not lodged in response to your tax return being amended as a result of a review – that is, a self-initiated objection.
This means if you claim for WFH expenses using the revised fixed-rate method and (for whatever reason) the amount needs to be changed, the ATO will not allow an objection to the amount using that method. You must object using the actual expenses method. This means you must have kept all of the actual records.
I expect there will be at least a million taxpayers that will make WFH expenses claims using the revised fixed-rate method. The above issue is likely to cause an issue for some thousands of those that made inaccurate claims.
Accountants – I recommend that you advise your clients of this issue.
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