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The Australian Taxation Office (ATO) has discreetly bumped the fixed rate work from home deduction.
Taxpayers can now claim 70 cents per work hour under the revised fixed cost method. Previously, it was 67 cents per work hour.
The revised change applies from 1 July 2024, meaning taxpayers can use this method for the 2024-25 income tax return.
What is the fixed-rate method?
The fixed-rate method apportions the additional running expenses you may incur by using a fixed rate for each hour you worked from home during the income year.
Those expenses include energy, internet, mobile and phone, and stationery and computer consumables, provided they are incurred on a fair and reasonable basis.
The fixed rate per hour calculates the total of your deductible expenses for the income year, but does not apply if a separate deduction is claimed for any of the eligible expenses.
“It is designed to simplify the calculation and the records required to claim working from home expenses,” an ATO spokesperson told SBS News.
If you do not use the fixed-rate method, you will need to use the actual expenses method to claim a deduction for the additional expenses you incur as a result of working from home.
“Taxpayers can use the method that gives them the best outcome, provided they’ve kept the right records,” the spokesperson said.
Who can claim it?
You can rely on the fixed-rate method to calculate a deduction for additional running expenses if you work from home while carrying out your employment or business duties, incur additional running expenses as a result of working from home and keep relevant records to evidence the running expenses you are incurring.
Such evidence must include at least one monthly or quarterly invoice for each of the expenses, or one receipt for every item bought.
Reliance on the fixed-rate method does not require that you have a separate home office or dedicated work area set aside in your home.
How to calculate your deduction
In order to calculate the total deduction for running expenses, first calculate the number of hours worked from home during the income year and multiply it by the fixed rate.
Then, calculate the work-related decline in value of any depreciating assets used to work from home during the income year.
The sum of both results will determine the amount that can be claimed as a tax deduction.
Why the change?
The ATO said the 3 cent bump reflects the most current Australian Bureau of Statistics data on the ‘basket of goods’, as it pertains to “relevant expenses included in the rate”.
That metric uses a representative collection of items used to measure changes in the cost of living and inflation over time.
“The update to the rate does not alter the expenses included under the method or eligibility criteria,” an ATO spokesperson said.
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