On 16 February 2023, the ATO issued Practical Compliance Guideline PCG 2023/1 in relation to deductions for working-from-home related expenditure. The PCG is applicable from 1 July 2022.
Prior to 1 July 2022, a client had the choice of using either the shortcut method, fixed-rate method or actual expenses incurred for working-from-home expenses. From 1 July 2022, a client can continue to claim actual expenses or a ‘revised fixed-rate method’ at 67 cents. Broadly, in order to claim the revised rate, the following criteria must be satisfied:
- Working-from-home requirement
- Incurring deductible additional running expenses
- Keeping and retaining additional records
The work has to be substantive and directly related to income-producing activities. The PCG states that “minimal tasks, such as occasionally checking emails or taking phone calls while at home will not qualify”.
The PCG will only apply to ‘additional running expenses’ defined as energy expenses, internet expenses, mobile and home phone expenses and stationery and computer consumables.
In relation to the record keeping criterion, clients will need to keep:
- records showing total number of hours spent working-from-home during the year; and
- one document (such as an invoice, bill or credit card statement) for each type of additional running expense that was incurred in the income year.
For the period 1 July 2022 – 28 February 2023, clients need only have kept a record that is representative of the hours worked, with the full record keeping requirement commencing from 1 March 2023.
The PCG clarifies that a record of the total number of hours worked can take any form, provided it is kept contemporaneously. Examples include timesheets, rosters, logs of time spent accessing employer systems or online business systems, time-tracking apps, or a diary or other documents kept contemporaneously.
In many instances, clients may choose to claim actual costs incurred over the revised fixed rate method if this results in a higher claim. An important issue will be whether the 67 cents per hour for the 2023 income year is an appropriate method given the higher cost of living during this year. Further, given the current high rate of inflation, it will be necessary for the ATO to revise this rate accordingly for the 2024 year onwards.
If you have any queries in relation to the above, please contact our office on 08 9388 9744.