On February 16, the ATO announced significant changes to how you claim home office expenses on your 2023 tax return.
Before we get into the details, don’t worry – we’ll help you get it right. You won’t notice the changes in your tax return because we’ll automatically calculate which deduction method gives you the biggest refund; you don’t have to work it out for yourself.
However, you may need to adjust your record keeping, because it is becoming more strict.
Read on for our full overview of what’s changed with home office expenses rules in 2023, including record keeping.
What’s changed with record keeping for my 2023 tax return?
1 July 2022 – 28 February 2023:
The ATO states you must keep a record “representative” of the total number of hours you worked from home between 1 July 2022 and 28 February 2023. This is essentially the same as what you usually need to do when claiming work from home expenses.
Changes from 01 March 2023 onwards:
You must keep a record of the actual hours you worked from home between 1 March 2023 and 30 June 2023. No estimates will be accepted.
Records of home office running expenses
You must keep a record of the home office running expenses you paid for and that relate to your hours worked at home. Read more in this article about working from home tax deductions.
Records you should keep include:
For power, gas, home phone, mobile and internet expenses, you should keep your bills/invoices (monthly or quarterly).
If bills are not in your name, you must show evidence of the expense, such as a joint credit card statement or joint property lease agreement. This is to prove that you share these expenses with someone else.
For occasional expenses, such as stationery, paper or printing ink, keep receipts for any work-related purchase.
Other changes to home office expenses in 2023
On the surface that looks like a win, but when you look closer, there are some downsides.
The fixed rate of 67 cents per hour now INCLUDES some expenses that you used to claim separately; that could mean less money for you. Etax helps maximise your claim.
In 2023 you can no longer claim these items individually, if you claim the 67 cents per hour:
Home and mobile phone expenses
Electricity and gas are used for heating, cooling and lighting
Stationery and computer consumables (ink, paper, etc.)
So what home office expenses can I claim in addition to 67 cents per hour?
Most of the common separate deductions are off the table. However, there are a few extra deductions you can still claim while also claiming the 67c per hour in 2023:
Depreciation of assets that cost more than $300 such as office furniture, computers and mobile phones.
Expenses for work-related purchases up to $300, such as desk chairs and monitors.
The cost of cleaning your home office and repairing office furniture.
When does the updated rate for home office expenses start?
The fixed rate changes were announced last week, but they come into effect on July 1, 2022.
That means these changes to home office expenses apply to your 2022-23 tax return.
Will I get less money back at tax time?
Quite likely. Historically, claiming each work from home expense separately has led to a larger deduction claim and higher refund. With the ATO rolling most of those expenses into one 67c rate, your home office expenses claim will be smaller in 2023.
One Silver Lining: There is another way to claim work from home expenses in 2023
It’s called the “Actual Cost Method”. Using this method to claim home office expenses in 2023 means you don’t claim 67c per hour. Instead, all of your expenses are claimed individually. These include:
Electricity and gas
Home and mobile phone expenses
Stationery and computer consumables
Cleaning your home office
Depreciation on office equipmentcosting more than $300 (E.g computer desk)
Office equipment costing less than $300.
To use this method, you must keep either:
A continuous 4 week diary that tracks your usual home working pattern,
A full 12-month record of the total number of hours you worked from home during the year.
Then for each deduction you claim using the actual cost method, you specify how much of the item’s use was for work purposes.
Which method is most suitable for me?
That depends on your personal circumstances. For many people the actual cost method will lead to a larger deduction, but some will find the revised 67c per hour works out better.
Don’t worry though – the Etax tax return has a lot of clever features built into it. Based on the information you enter on your tax return, we’ll automatically calculate which method gets you the biggest deduction. We’ll apply that to your tax return. Etax does the complicated calculations for you.
Keep in mind the strict new requirements for record keeping, especially keeping track of the hours you work from home across the year in a calendar or diary.