Warning: Start a Diary of Your Home Office Use Now!

This blog was originally posted on Ban Tacs and written by Julia Hartman, founder of the Ban Tacs group and Chief Technical Tax Advisor for Empower Wealth Tax. 
This report is also referenced and expanded in our series, Talking Property Tax with Julia Hartman in Episode 4. Watch it here >>

Despite objections from the Tax Agent community, the ATO has introduced new rules to make it near impossible and probably uneconomical to claim home office expenses on the cents per hour basis.  The first hurdle is you must start a diary now!  From 1^st March 2023, every hour all year must be recorded in a diary.

On 16^th February 2023, paragraph 5 was removed from this ruling. This section allowed you the option of just claiming 52 cents an hour, based on a 4-week diary, for home electricity, furniture.ect. This option was considered better, rather than having to go through all the trouble of calculating the actual cost method. (This ruling is still relevant if you are going to use the actual cost method.) Paragraph 5 has now been replaced by this new ruling.

The ATO is now claiming to have increased this rate to 67 cents but that is not quite the truth.  To qualify, you must keep a diary all year and not be able to claim a tax deduction for your mobile calls which was not the case under the 52 cents an hour rate.  If you are working 40 hours per week at home for 48 weeks that is a claim of $1,286.40 which is probably less than your mobile phone bill for the year but of course, it all depends on how much you use your phone for work. Using the 67 cents an hour rate also prevents you from claiming phone calls you make on your mobile for work even when you are not at home.

To help you discern which method is most suitable to your circumstances here is a comparison:

In both cases, plant and equipment such as printers and laptops will be depreciated over their effective life with a 4-week diary every year showing the ratio of business to work use.

Tips and Traps

If the ATO decides that you don’t qualify to use the 67 cents per hour method you cannot object. This now means you are only left with claiming the actual method so the only real certainty is to use the actual cost method. This is because, in an audit situation, the ATO can deny the 67 cents per hour method and you cannot challenge it. The ruling makes it very clear that if they catch you out on just one simple thing (such as arguing that you claimed more hours than you truly worked) then the whole claim is lost. 

To claim your mobile when not using the 67 cents per hour method you will still need to keep records for 4 weeks to show the ratio of private to business calls.  This is best done by screenshots of 4 weeks of recent calls within the financial year.  Print them up and put a “W” for work calls and a “P” for private calls against each entry. 

To work out the amount of electricity you are using for work purposes, turn everything else off in the house, just turn on your work equipment and see how much electricity is used then use your electricity bill to work out how much per hour this extra use is costing you. 

If you live at home with mum and dad, pay an actual share of the electricity bill so you can show that you have incurred extra costs because you are working from home. 

If you have kids, play games online or watch movies online, it is probably not worth the trouble of trying to claim your work-related internet use under the actual cost method.

Don’t delay, start record-keeping now!

Basically, anyone who has not started their diary on 1^st March 2023 will not be able to use the 67 cents per hour method.  Odds are, most taxpayers won’t even know about this trap until they see their tax agent next financial year. To help you get your records right whether you choose the actual cost method or the hourly rate Bantacs has created a detailed spreadsheet. Check it out here >>  

To help you get your records right whether you choose the actual cost method or the hourly rate Bantacs has created a detailed spreadsheet. Check it out here >>  It is available here for just $7.95 or contact your BAN TACS Accountant and they will send you a copy for free.

And if you’re looking for an experienced tax accountant, book in a no-obligation initial consultation with us today! You can learn more about it here or simply fill in the form below and one of our qualified tax accountants will get in touch with you soon.