Sunshine Coast and Brisbane Accountants - Clarke McEwan Accountants and Business Advisorrs
Sunshine Coast and Brisbane Accountants - Clarke McEwan Accountants and Business Advisorrs

What’s the Deal with Working from Home?

Clarke McEwan Accountants

What’s the Deal with Working from Home?


The Australian Taxation Office (ATO) has updated its approach to how you claim expenses for working from home.


The ATO has warned that it will no longer accept estimates or a sample diary over a four week period for the 67 cents fixed rate method of claiming work from home deductions. From 1 March 2023 You will need to demonstrate the actual hours you worked from home.


The ATO has ‘refreshed’ the way you can claim deductions for the costs you incur when you work from home. From 1 July 2022 onwards, you can choose either to use a new ‘fixed rate’ method (67 cents per hour), or the ‘actual cost’ method depending on what works out best for your scenario. Either way, you will need to gather and retain certain records to make a claim.


The first issue for claiming any deduction is that there must be a link between the costs you incurred and the way you earn your income. If you incur an expense but it doesn’t relate to your work, or only partially relates to your work, you cannot claim the full cost as a deduction.


The second key issue is that you need to incur costs associated with working from home. For example, if you are living with your parents and not picking up any of the expenses for running the home then you can’t claim deductions for working from home as you have not incurred the expenses, even if you are paying board (the ATO treats this as a private arrangement).


Let’s take a look at the detail:


The new ‘fixed rate’ method


Previously, there were two fixed rate methods to choose from for the 2021-22 income year:


  • A cover-all 80 cents per hour rate for expenses incurred while working from home (which was available from 1 March 2020). This COVID-19 related rate was intended to cover all additional running expenses incurred while working from home; or
  • If you had a space dedicated to work but were not running a business from home, you could claim 52 cents for every hour you worked from home to cover the running expenses of your home. This rate doesn’t cover certain items such as the depreciation of electronic devices, which can be claimed separately.


It’s clear that working from home arrangements are here to stay for many workplaces even though COVID restrictions have eased. So, from the 2022-23 financial year onwards, the ATO has combined these two fixed rate methods to create one revised method accessible by anyone working from home, regardless of whether they have a dedicated space or are just working at the kitchen table.


The new rate is 67 cents per hour and covers your energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. You can separately claim the cost of the decline in value of assets such as computers, repairs, and maintenance for these assets, and if you have a dedicated home office, the cost of cleaning the office.

 

 If there is more than one person working from the same home, each person can make a claim using the fixed rate method if they meet the basic eligibility conditions.


What proof do the ATO need that I am working from home?


To use the fixed rate method, you will need a record of all of the hours you worked from home. The ATO has warned that it will no longer accept estimates or a sample diary over a four week period. For example, if you normally work from home on Mondays but one day you have an in-person meeting outside of your home, your diary should show that you did not work from home for at least a portion of that day.


Having said that, the ATO will allow taxpayers to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.


There is nothing in the ATO guidance to suggest that claims are limited to standard office hours. That is, if you work from home outside standard office hours or over the weekend, then make sure you keep an accurate record of the hours you are working so that you can maximise your deductions.


You also need to keep a copy of at least one document for each running cost you have incurred during the year which is covered by the fixed rate method. This could include invoices, bills or credit card statements. Where bills are in the name of one member of a household but the cost is shared, each member of the household who contributes to the payment of that expense will be taken to have incurred it. For example, a husband and wife, or flatmates where they jointly contribute to costs.


You need to keep these records for five years so that if the ATO come calling, you can prove your claim. If this proof is not available at the time, the deduction will be denied. If your work from home diary is electronic, ensure you can access this diary over time (such as producing a PDF summary of your calendar at the end of each financial year clearly showing the dates and times of your work).


The ‘actual’ method


Some people might find that the ‘actual method’ produces a better result if their expenses are higher. As the name suggests, you can claim the actual additional expenses you incur when you work from home (and reduce the claim by any personal use and use by other family members). However, you will need to ensure you have kept records of these expenses and the extent to which the expenses relate to your work.


Using this method, you can claim the work related portion of:


  • The decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
  • Electricity and gas (energy expenses) for heating, cooling and lighting.
  • Home and mobile phone, data and internet expenses.
  • Stationery and computer consumables, such as printer ink and paper.
  • Cleaning your dedicated home office.


Be careful with this method because the ATO are looking closely to ensure these expenses are directly related to how you earn your income. For example, you can’t claim personal expenses such as coffee, tea and toilet paper even if you do use these items when you are at work. Nor can you claim occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates unless your home is a place of business. It is unusual for an employee’s home to be classified as a place of business.


I run a business from home, what can I claim?


Where your home is also your principal place of business and an area is set aside exclusively for business activities, you can potentially claim a deduction for an appropriate portion of occupancy expenses as well as running costs. An example would be a doctor who runs their surgery from home.


The doctor may have one-third of the home set aside as a place of business where they see patients.


It is important to keep in mind that Capital Gains Tax (CGT) might be payable on the eventual sale of the home. While your main residence is normally exempt from CGT, the portion of the home set aside as a place of business will not generally qualify for the main residence exemption for the period it is used for this purpose, although if you are eligible, the small business CGT concessions and general CGT discount may reduce any resulting capital gain.

Federal Budget 2025-26: what it means for your small business
By Clarke McEwan March 29, 2025
The Treasurer, Jim Chalmers, delivered the Federal Budget on 25 March. But what’s in the Budget for small business owners? We’ve got the lowdown on the main opportunities. #FederalBudget #Budget #businesstips
By Clarke McEwan March 21, 2025
As your accountant, we won't just look after the financial side of your business, we can also advise you on the strategic side of your company, including the importance of business development as vital part of your growth plan. Business development (BD) is what helps your company move from slow, organic growth to fast-paced, hypergrowth. And it’s only by putting the right drive and expertise behind your BD that you can turn your strategic ideas into real success stories. So, how can we help you achieve this? Talk to you about your strategic goals The starting point for any kind of BD activity is to pin down your goals and aims as a business. When you know what you want to achieve over the coming months, it’s far easier to define a strategy for success. And that’s easier to do when you talk to an objective adviser, like us. We can sit in on your board meetings, talk to your executive team and get a real handle on what makes the business tick. And, armed with this knowledge, we’ll work with you to drive the direction of your BD and find the best opportunities for you to focus on. Help you create a clear BD strategy and plan Having a defined set of BD goals is a good starting point. But to put this all into action in a productive way, you’re going to need a comprehensive plan for your BD projects. Our years of experience advising business leaders and their teams really comes into play here. We know the best routes to take, the budgets that will be needed and the right tactics for bringing in more contracts, sales and partnerships. By putting these strategies into a clear plan, and linking this to agreed timescales, you have a BD route map to follow and action. Introduce you to a broader network of business partners We work with a wide range of businesses across many different sectors, industries and niches. By introducing you to our network of clients, we welcome you into a supportive community of like-minded business owners. And that’s excellent news when looking for new partnerships. Whether it’s attending a local conference, an online webinar or one of our in-house client events, you’re going to meet new people, share new ideas and make the right connections. This is a great way to build alliances and work together with other local businesses. And when you’re well-connected, you set the very best foundations for your future BD activity. Provide better routes to funding and investment Whatever goals you’ve set for your BD projects, it’s likely that you’re going to need additional funding to finance this activity. Investing in your expansion, or new partnerships, is vital to getting a good return on your BD, so great access to finance is a definite bonus. We’ll advise you on the most appropriate funding channels and how you can use these facilities to finance your BD plans. And we can also link you up with banks, lenders and business finance specialists – so you get the advice and finance you need to bring your BD to life. Help you track and measure your BD performance Meeting your BD targets takes time – and a whole lot of dedication. Measuring your BD performance over time, helps you stay on track and gives you a good indication of how well you’re tracking against your planned progress. We’ll help you create the reporting and metrics you need, so you have clear data to track your progress over time. You can log your activity in your project management system, or your client relationship management (CRM) software, and keep clear notes on contacts made, relationships built and targets converted etc. If you want to get more from your BD, please do get in touch. We’ll partner with you to put some real drive, experience and impetus behind your BD strategies.
By Clarke McEwan March 13, 2025
The Government has announced a temporary ban on investors buying established homes between 1 April 2025 to 31 March 2027. The measure aims to curb foreign “land banking.” From 1 April 2025, foreign investors (including temporary residents and foreign-owned companies) will be prohibited from acquiring established dwellings unless they qualify for specific exemptions. While exemptions exist, they are limited. In addition, foreign investors purchasing vacant land will be required to meet development conditions that require the land to be used productively within a reasonable timeframe.
By Clarke McEwan March 13, 2025
Global Google searches for the word “tariffs” spiked dramatically between 30 January and 2 February 2025, a +900% increase to the previous 12 months. We look at what tariffs really mean. Who pays for tariffs? Tariffs increase the price of imported goods and reduce trade flows of that good or service. Traditionally used to protect specific domestic industries by reducing competition, tariffs increase the price of foreign competitors and reduce demand. In his first term, President Trump imposed a 25% global tariff on steel and a 10% tariff on aluminium (which Australia managed to reduce to zero with supply limits imposed instead). The impact was reportedly a 2.4% increase in the price of aluminium and 1.6% increase in the price of steel in the domestic US market. The cost of tariffs is not borne by overseas suppliers but indirectly through a reduction in trade and domestically through higher prices, particularly where those goods and services are common. For the US however, the negative impact of tariffs will be felt less abruptly than many of its trading partners as trade only represents around 24% of US gross domestic product (GDP) – whereas trade accounts for 67% of Canda’s GDP. Where we are at with US trade tariffs While talking to shock jock Joe Rogan during his election campaign, Donald Trump stated, “this country can become rich with the proper use of tariffs.” In his second week of office, President Trump used emergency powers to curb the “extraordinary threat” of illegal aliens, drugs and fentanyl into the US, by imposing the following tariffs : · Canada - 25% additional tariff on imports from Canada (except energy resources that have a reduced 10% additional tariff). Canada responded by imposing its own 25% tariffs on a range of predominantly agricultural products and household goods. Canada is a trading nation and exports represent two-thirds of its GDP. In 2023, the US represented 77% of Canada’s total goods export. · Mexico - 25% additional tariff on imports from Mexico . Mexico has responded with its own 25% tariff on US goods. · China - 20% additional tariff on imports from China. The US trade deficit was over $900bn in 2024 of which China accounts for around $270bn. The additional tariff on postal shipments from China to the US has since been temporarily suspended for items with a value under $800 until the US postal service is able to collect the tariff. China’s response has been to impose additional tariffs on certain US imports including a targeted 15% tariff on agricultural products including chicken, wheat, corn and cotton, and a 10% tariff on fruit, vegetables, dairy products, pork, beef and sorghum. Export controls have been placed on some critical minerals. In addition, China has filed a complaint to the World Trade Organization. Industry specific tariffs and investigations · Steel imports – from 12 March 2025, the original 25% steel tariff is set to resume without the bi-lateral agreements reached over time with many nations including Australia watering down the tariff. · Copper imports – while no actions on tariffs, the President has ordered an investigation into the threat to security of copper imports . · Imports of timber, lumber products – while no action or impositions as yet, the President has ordered an investigation into the threat to security of imports of timber, lumber and derivative products such as paper. · US tech giants – it seems that the President is concerned by digital services taxes (DST) imposed on US technology companies and has vowed to respond with tariffs and other measures. Australia does not impose a DST and instead is aligned to the OECD reforms of digital taxing rights. Will Australia face US tariffs on other goods? Australia has a large trade surplus with the US which would normally make the imposition of tariffs less likely. However, specific industries may be impacted by product or industry based tariffs, such as steel and aluminium. The largest American imports into Australia are financial services, travel services, telecoms/ computer/ information services, royalties and trucks. Australia’s largest exports to the US are financial services, gold, sheep/goat meat, transportations services and vaccines. Impacts of trade wars on Australia Australia is impacted indirectly by demand. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade in 2023. If Chinese demand slows as a result of a trade war, Australia’s economy will slow. But there is a pattern in President Trump’s approach to international and trade relations that suggests that an all-out trade war might not occur: a bold line or policy is stated - a statement that tells a story to the US public consistent with his election sentiments; then, wound back either partially or fully after concessions have been secured or concessions stated. For Australia, there is a risk in these policy machinations that China again agrees to reduce the US trade deficit by purchasing more from the US, potentially to the detriment of Australian suppliers. For Australian business, uncertainty and volatility is the problem. Uncertainty slows the economy and impacts business revenue while at the same time, costs may increase. For those in the business of selling product manufactured and distributed from China or through other trading partners directly impacted by tariffs, watch for more supply chain issues and potential cost increases. If the US export markets retracts, there is also a risk other trading nations look to dump their products to help offset losses.
FBT 2025: What you need to know
By Clarke McEwan March 12, 2025
The Fringe Benefits Tax (FBT) year ends on 31 March. We’ve outlined the hot spots for employers and employees.
Which Xero app is right for your business?
By Clarke McEwan March 2, 2025
Which Xero app is right for your Aussie business? We’ve got the lowdown on the top 12 Xero apps and how they can form your perfect Xero app stack. #xero #apps #businesstips
More Posts
Share by: