Stay Savvy with Your Work-from-Home Deductions This Tax Season
As the end of the financial year approaches, Australians working from home need to be vigilant about their tax deductions. The ATO is tightening its scrutiny on work-from-home expenses, cautioning taxpayers against "double dipping" when filing their returns.
Increased Scrutiny on Work-from-Home Deductions
With remote and hybrid work arrangements becoming the norm, many Australians are claiming deductions related to working from home. Last year alone, over eight million people filed work-related deductions, with around half of those for home office expenses.
ATO Assistant Commissioner Rob Thomson highlighted that work-from-home expenses are commonly miscalculated, which is why they are under close watch this year. While many errors are unintentional, some cases involve deliberate misrepresentation.
Avoiding Double Dipping
There are two methods to calculate work-from-home deductions: the fixed rate method and the actual cost method. Confusing these methods often leads to double dipping, which can be unintentional.
“One thing we’re focused on this year is making sure that people don’t double dip, so they don’t claim things like their internet or their phone expenses separately if they’re using that fixed rate method,” Thomson told the ABC. He also emphasized the importance of proper record-keeping, advising taxpayers to maintain thorough documentation of their work-from-home hours, whether through a timesheet, spreadsheet, or diary.
Understanding the Fixed Rate Method
The fixed rate method allows you to claim 67 cents for each hour worked from home during the income year. This rate covers expenses such as:
Home and mobile internet or data
Mobile and home phone usage
Electricity and gas for heating, cooling, and lighting
Stationery and computer consumables
When using the fixed rate method, you cannot claim additional deductions for these expenses. However, you can claim separate deductions for work-related technology and office furniture, provided they cost $300 or less and are primarily for work.
Understanding the Actual Costs Method
The actual costs method involves calculating the specific additional expenses incurred from working from home. Deductible expenses include:
Depreciation of home office furniture and technology
Electricity and gas for heating, cooling, and lighting
Home and mobile phone, data, and internet expenses
Stationery and computer consumables
Cleaning your dedicated home office space
Only the work-related portion of these expenses can be claimed. For instance, if your phone is used 40% for work, you can claim 40% of your phone bill.
Expert Advice and Cautions
According to Richard Whitten, a money expert at Finder, the actual costs method provides a more detailed calculation, while the fixed rate method is more general. “A dedicated workspace at home justifies claiming a portion of your electricity bill and cleaning costs,” he said, stressing the importance of keeping receipts and records.
Thomson also warned against reusing last year's deductions without proper updates, as it could prompt an inquiry from the ATO. “Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’,” he said.
Honesty Is the Best Policy
A Finder survey revealed that one in ten Australians admitted to lying on their tax return. Younger generations, particularly Gen Z and millennials, were more prone to this, with higher percentages admitting to untruthfulness compared to Gen X and baby boomers.
Sarah Megginson, a personal finance expert at Finder, warned against falsifying information to receive a higher return. “Even a mistake you didn’t mean to make can cause trouble. Don’t risk making things worse by trying to ‘trick the system’,” she said. For those with complex tax situations, seeking professional help is advisable to ensure accurate and compliant filings.
By understanding the different methods of calculating work-from-home deductions and maintaining accurate records, you can confidently navigate your tax return this year and avoid any unnecessary complications.
