The ATO has issued PCG (Practical Compliance Guideline) 2023/1 in relation to deductions for working from home related expenses. 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.
The full record keeping requirement commenced 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. Alternatively, we’ve put together a working from home diary template to help you record your hours for the July 2023 – June 2024 period.
In many instances, clients may choose to claim actual costs incurred over the revised fixed rate method if this results in a higher claim.