Updated Home Office Expense Claim Methods For 2023 FY

Many people are now spending more time working from the home office, and for a small business owner, this can often be a great “lever” to pull to help reduce the income tax liability at tax time.

The ATO have recently updated the “cents per hour” method, which from my own experience of seeing the old/former method applied across hundreds of clients over the past year or so, provided a great tax reduction for many. Now with a higher hourly rate available, it can certainly be worth the additional “squeeze” when it comes to the effort required to meet the updated record keeping requirements.

For the 2023 FY, there will be two ways to claim for home office expenses, and those are:

  1. Actual costs, or
  2. Cents per hour

Previously, the fixed rate cents per hour claim amount was 52 cents, this has increased to 67 cents per hour.

However, to claim this higher cents per hour rate, there are several requirements, and those are:

  • you must incur additional running expenses as a result of working from home
  • you will be required to have a record of the total number of hours you work from home and the expenses you incur while working at home (a logbook or time tracking report will be recommended)

Without this, your tax agent will not be able to process this claim (they can use the actual cost method, although cents per hour can work out a better method for some).

The updated cents per hour method covers your internet, telephone, utilities, stationery, computer consumables etc.

You will still be able to claim, separately, for the decline in value of equipment (depreciation) for work related items that cost more than $300 (there’s an immediate claim for work related items under $300).

For expenses not covered by the above mentioned fixed rate method, you will need to have records for those expenses that show the work-related portion of those expenses (no different to prior years).

What do you need to do now?

  1. If you’re not already, start to keep a logbook/record of the hours you work from home each day.
  2. Keep track of expenses and related receipts (cloud drives for receipt storage or accounting systems that allow for receipt upload per transaction are all brilliant).

If you’re an Oceans Accounting client, keep your records as suggested in this post, and Holly will provide specific guidance at tax time and also offer a comparison of methods to ensure you get the best outcome.

Otherwise, reach out to your tax agent to check what applies for your business/circumstances, specifically.