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04 Nov 2022

The ATO has released a draft practical compliance guideline (PCG 2022/D4) which gives the ATO’s guidance on claiming home office costs from 1 July 2022. On 30 June 2022, the COVID short cut method of 80 cents per hour working from home ceased.

This new guidance proposes from 1 July 2022 that two methods can be used to claim home office expenses:

– The actual method where the taxpayers calculates the actual costs incurred for utilities, internet, mobile, computer costs and stationery. This usually involves claiming a percentage of these costs for the income producing portion and requires a separate home office area to be maintained in your home.

– A new 67 cents shortcut method per hour worked from home which would cover all home office costs. The only item that can be claimed on top of this 67 cents rate is depreciation on home office furniture and/or computers.

This new shortcut method has a few benefits – it does not need a separate home office area to be maintained and it can be claimed by multiple parties at the same house.

However, there is more strict record keeping requirements for this and the 67 cents rate does appear to be low given the increasing costs of living. Taxpayers must keep an actual record of their home office hours. An estimate will not be sufficient and will be rejected by the ATO. The taxpayer must also be required to work from home and be able to prove the link between this work and their income. Merely checking emails or rosters or answering ad hoc calls at home will not qualify as working from home under this short cut method. The taxpayer must also need to be able to provide a copy of the relevant invoices (i.e. a copy of an internet and utility bill).

As always, we wait and see what the final guidance will look like but it is important to note that based on this draft ruling records need to be kept from 1 July 2022 so we recommend taxpayers start to keep track of their hours working from home. Timesheets, rosters or a diary are recommended by the ATO as methods to do so.

If you have any queries, please do not hesitate to contact us.

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