Taxpayers who work from home, or who use a vehicle for business purposes, need to be aware of some changes when claiming deductions this tax time, including the following.

Cents-per-kilometre method

The cents-per-kilometre method for claiming car expenses increased from 72 cents to 78 cents per kilometre in the 2023 income year. For taxpayers using this method, the 78 cents per kilometre rate covers all their vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. Taxpayers using this method cannot claim these costs separately.

Car limit for business owners using the logbook method

The car limit has also increased to $64,741 for the 2023 income year. The car limit is the maximum value taxpayers can use to work out the depreciation of passenger vehicles (excluding motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers.

Work from home expenses - 'fixed rate method'

For the 2023 income year, the 'fixed rate method' (for taxpayers working from home) increased from 52 cents to 67 cents per hour worked from home, and taxpayers are no longer required to have a dedicated home office space.  The fixed rate method covers electricity, gas, stationery, computer consumables, internet, and phone usage.  Taxpayers can also claim separate deductions for expenses not included in the hourly rate, such as the decline in value of depreciating assets, e.g., laptops or office furniture.

What proof does 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 using timesheets, diary records or a spreadsheet such as the one that you can download HERE. 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 representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023. If you work from home outside of normal office hours, make sure your diary notes the hours that you worked.

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. For example, if you use your phone and electricity when you work from home, keep one bill for each of these expenses. 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.

Work from home expenses - Actual method

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 is 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.

Need Help?

Talk to us if you want assistance with working out the best method to claim your deductions this year.

Please note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation