Work from home, WFH Australian tax rules: Quiet change is bad news for EVERY home worker

Australians who work from home may soon lose the ability to easily claim their phone, internet and electricity bills from taxes, potentially putting them up to $1,400 a year worse off.

With the onset of the Covid pandemic in March 2020, the federal government introduced a shorter tax filing method for Australians working from home. This would allow them to reclaim the cost of their energy consumption, internet and telephone costs at a flat rate of 80 cents per hour.

That simple method of just multiplying their hours by 80 cents — instead of adding their bills together — expired on June 30 of this year. All that remains now is an option for employees to claim a lower rate of 52 cents per hour, provided they have proof and are willing to calculate their expenses manually.

But Daily Mail Australia can reveal that the Australian tax office plans to replace that rate with a new flat rate of 67 cents for every hour worked at the home study or dinner table.

This would halve the amount a work-from-home professional could potentially claim as a tax deduction.

It would also be retroactively rolled back to July 1, 2022 — meaning those who kept their receipts for the past few months may have wasted their time.

A draft proposal has been sent to accounting and community groups explaining that homeworkers can no longer make claims for phone calls, internet connection, electricity bills, stationery, or computer parts such as ink cartridges if they claim a new 67 cents per hour flat fee.

‘You can therefore not claim an extra separate deductible item for any of these costs,’ says the Tax and Customs Administration document said.

‘The hourly rate calculates the total of your deductible costs for energy, internet, mobile and/or house telephone and office and computer consumables for the income year.’

A white-collar professional who works from home would not be able to claim his cell phone calls as a separate deduction.

“For example, if you use your cell phone when you work from home and if you work somewhere other than home, your total deduction for cell phone costs for the income year falls under the hourly rate of 67c per hour,” the tax authorities said.

“The revised flat rate method allocates the following additional ongoing expenses you incur on a fair and reasonable basis using a flat rate of 67c per hour for each hour you worked from home during the income year.”

Mark Chapman, H&R Block’s director of tax communications, said the new 67-cent rate would replace both the 52- and 80-cent-per-hour rates and make life harder for those who work from home.

“This is generally bad news for taxpayers,” he told the Daily Mail Australia.

An ATO spokesperson said the old flat rate of 80 cents per hour, which was extended for a year, was only temporary.

“We have taken the opportunity to revamp the fixed rate method to better reflect today’s working arrangements,” he told the Daily Mail Australia.

“The flat rate method aims to provide a proxy methodology to help taxpayers manage what can be complicated imputation calculations for common expenses incurred while working from home.”

The tax office argued that the new 67-cent rule increases the 52-cent-per-hour rule, but it’s less flexible.

The existing 52 cent rule made it possible to claim a percentage of mobile, internet and stationery based on actual costs.

Electricity for heating or cooling was included based on hours worked.

The new 67-cent rule now covers all communications costs, meaning an employee who doesn’t own a pocket may not be able to make the same deductions.

However, taxpayers could file separate claims for depreciation of office equipment and furniture under the new rule.

The new rule would also be retroactive to July 1, 2022 instead of July 1, 2023.

“Imposing new rules retroactively in November — and in draft form they could change before they’re final — doesn’t inspire confidence from taxpayers,” Mr Chapman said.

H&R Block calculated that under the old 80 cent rule, someone who works from home for a year would typically get a deduction of $1,536.

This rose to $2,618 under the existing 52 cent rule, as someone could manually claim cell phone, internet, and stationery.

But under the new rule of 67 cents per hour, that dropped to $1,286.40, as these items would no longer be receivable.

That equates to a difference of $1,400 per year compared to the new method with the existing 52 cent method.

Items such as furniture that cost less than $300 can be claimed in one fiscal year under the new 67-cent rule and the existing 52-cent rule.

Under the old 80 cent rule, Australians who worked from home did not have to withhold their energy bills to prove they had incurred the costs.

The new 67-cent rule would require them to keep their monthly or quarterly utility bills to prove they were working from home.

“This is new and imposes a significant compliance burden, especially for people who previously used the 80 cents per hour method, who only needed to keep track of hours worked,” said Mr. Chapman.

‘The compliance requirements are stricter.

“In addition to a record of the time he spent working from home — a carryover from both old methods — the taxpayer must also keep records of each of the additional business expenses he incurred.”

Under the changes, the tax authorities will no longer require home workers to have a specific study space to claim the new rate of 67 cents.

“We welcome the decision that taxpayers will not need to have a separate home office or dedicated workspace to benefit from the revised flat rate method,” said Mr Chapman.

“It recognizes that for many – for example people living in apartments and small houses – it is not feasible to have their own home office within the footprint of their home and that many people use, for example, the living room or the kitchen as their home workplace.’

But those who forgo the flat rate of 67 cents and opt for the “actual cost” method will still need to have space and records to prove the cost of heating or cooling their work area.

Tamara Burns, a chartered accountant and director of PB Taxation Services in Port Macquarie, told the Daily Mail Australia that this was unrealistic.

“You would have to have a designated space that is not shared with other parts of the house in order to lay claim to electricity, a luxury not available to everyone,” she said.

“Not everyone has a spare room that they can convert into an office.”

The tax authorities released a draft document on Wednesday afternoon, but the consultation closes on November 30.