For the 2022/2023 income tax year, the fixed rate method in claiming working from home expenses has increased from 52 cents per hour to 67 cents per hour.
What does the fixed rate method cover?
The fixed rate method covers additional running expenses whilst working from home such as the below:
- home and mobile internet or data expenses
- mobile and home phone usage expenses
- electricity and gas (energy expenses) for heating, cooling and lighting
- stationery and computer consumables, such as printer ink and paper.
How do I qualify to claim the fixed rate method?
You will need to record the total number of hours worked from home, for example, keeping a diary to record the date and number of hours you worked that date. In addition to the hours recorded, you will also need to retain copies of receipts and tax invoices for home office expenses incurred such as phone and utilities bills.
An additional deduction that is separate from the fixed rate method.
Taxpayers cannot claim separate deductions for running expenses covered under the fixed rate method, however, they can claim the following:
- For work-related assets costing > $300, the depreciation of the assets (i.e. office furniture, computers and mobile phones).
- For work-related assets costing < $300, immediate deduction of the work-related purchases (i.e. desk, chairs and monitors).
- The cost of cleaning your home office and repairing office furniture.
When you use your depreciating assets for both work and private purposes, you will need to adjust for any private usage.
Is there another method other than a fixed rate?
Yes, there is! Apart from the fixed rate method, taxpayers can choose the actual cost method. The distinct difference between the two methods is that the fixed rate method claims on an overall expenses basis whilst the actual cost method claims on an individual expenses basis, the latter requires significant efforts in records keeping and detailed calculations on the split of personal and business use of costs incurred when working from home. The actual cost method may sound terrifying, however, have no fear as your team at Hall Chadwick QLD will be able to provide assistance in calculating the correct split.
Fixed rated or actual cost method?
Generally, if a taxpayer predominantly works from home and incurs higher work from home expenses, choosing the actual cost method will provide a greater tax deduction. Hence, the increase in the fixed rate is likely to benefit taxpayers who partially work from home.
As each taxpayer’s tax situation is different, to work out which method best suits you, contact your Hall Chadwick QLD advisor now.