23 February 2023

Work-from-home tax rules change, just in time for the latest ATO graduate intake

| Chris Johnson
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Work from home

The ATO has changed record-keeping requirements for working-from-home deductions. Photo: File.

Tough new changes to work-from-home deductions being implemented by the Australian Taxation Office is possibly one reason for a record high intake of graduates this year.

The ATO’s public service graduate intake for its 12-month program is the highest it has been, with 530 onboard this month and another 200 earmarked for an extraordinary mid-year intake.

ATO Commissioner Chris Jordan has told his staff the higher intake is in preparation for what is expected to be a massive year ahead for the department.

“The modernising business registers program, our response to fraud and the APS reforms are among the big, complex programs of work we need hands on deck to deliver,” Mr Jordan told his staff via email.

“The graduates will beef up our capacity while also injecting some new thinking into the organisation.”

Work-from-home tax deduction claims will be a particular focus of the ATO.

The ATO has recently announced it has “refreshed” the way taxpayers claim deductions for costs incurred when working from home to “better reflect” contemporary working-from-home arrangements.

The ‘fixed rate’ method of claiming such deductions has changed.

Claiming deductions via the ‘actual cost’ method isn’t changing.

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With the pandemic having resulted in skyrocketing work-from-home claims in recent years, the ATO is now on a mission to ensure claims are valid – and that it’s harder to make those claims.

And even though just announced, the revised fixed rate method applies from 1 July 2022, to be used when taxpayers are working out deductions for their 2022–23 income tax returns.

“To claim your working from home expenses, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls,” ATO assistant commissioner Tim Loh said.

“Also, you must incur additional expenses as a result of working from home.

“No matter which method you use, make sure to keep records. This will give you more flexibility to choose the method that gives you the best deduction at tax time, depending on your circumstances.

“Items that are difficult and tedious for everyday Aussies to calculate actual work-use, like phone, internet and electricity expenses, are included in the revised rate.

“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.”

While workers will no longer need a dedicated home office to qualify for the fixed rate method for claiming deductions, record-keeping to justify claims has become more onerous.

“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,” Mr Loh said.

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

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Taxpayers will need to keep a record of all the hours worked from home for the entire income year.

The ATO won’t accept estimates, or a four-week representative diary or similar document under this method from March this year.

Transitional arrangements are in place for 2022-23 for those who haven’t kept records so far this income year.

Records of hours worked from home can be in any form provided they are kept as they occur, and records must be kept for each expense.

For example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses.

Commissioner Jordan recently asked the Federal Government for his 20,000 staff to be treated as special cases and be given an immediate 1 per cent wage increase while APS-wide salary negotiations continue.

Finance and Public Service Minister Katy Gallagher said no.

The Commissioner argued that his staff had worked really hard over the past couple of years.

With all the changes being introduced, it looks like their workload – as well as the bureaucracy requirements for any taxpayer working from home – isn’t going to ease up any time soon.

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