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Fixed rate of 67c an hour will typically leave people out of pocket compared with previous methods, says H&R Block.
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Revised work-from-home regime ‘bad news for taxpayers’
03 November 2022
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The ATO’s revised work-from-home fixed rate of 67c is “unfair to taxpayers” and will typically leave them worse off than the two methods it replaces, says the director of tax communications at H&R Block, Mark Chapman.
An average taxpayer who spent six months working from home would have their deduction reduced by about $125 compared with the previous 80c-an-hour shortcut method while under the fixed rate 52c system it would be cut in half to just $634, he said.
Mr Chapman said H&R Block had asked the ATO “to provide justification of this rate” released yesterday as PCG 2022/D4, “but they have failed to provide anything”.
"This is generally bad news for taxpayers," he said. "The introduction of a fixed rate of 67c is unfair."
PCG 2002/D4 said the fixed-rate 67c-an-hour claim would include all energy, internet and mobile expenses as well as costs incurred for stationery and computer consumables.
“This means you cannot claim an additional separate deduction for any of these expenses,” the ATO said.
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“For example, if you use your mobile phone when you are working from home and when you are working from somewhere other than your home, your total deduction for mobile phone expenses for the income year will be covered by the hourly rate of 67c per hour.”
However, the PCG would allow claims for “a deduction for the decline in value of depreciating assets used while working from home (for example, a computer or similar electronic device, desk and office chair)” as well as certain other running expenses as long as appropriate records were kept.
Although PCG 2022/D4 commences on 1 July, stricter record-keeping requirements begin on 1 January 2023 with the need to record the “actual hours” worked from home and “evidence for each of the additional running expenses that they incurred”.
Mr Chapman said the compliance burden would now be significant, particularly for those who had previously used the 80c shortcut method, and the revisions were badly timed.
“The change should instead have been introduced from 1 July 2023, which would give taxpayers sufficient time to set up their record-keeping systems appropriately. Retrospectively introducing new rules in November (and in draft form at that, they could change before finalisation!) does not inspire taxpayer confidence.”
However, he welcomed an ATO decision to waive the need for a separate home office or dedicated work area for the revised fixed rate, a sentiment echoed by the professional bodies.
IPA general manager of technical policy Tony Greco said this was an advantage of the revised 67c rate and the 80c shortcut method as both recognised “that most people working from home did not have a dedicated space to perform their day job”.
Another plus was that multiple people in the same house could use the fixed rate method simultaneously, or a taxpayer could chose which method to apply with actual cost system continuing as before.
And he said with PCG 2022/D4, the ATO was reflecting Australia’s changed circumstances post-pandemic.
“What is playing out now is that employers are either being offered a hybrid arrangement or allowing employees to mostly work from home. This is the new normal and therefore our tax system needs to adapt.”
CPA Australia senior manager tax policy Elinor Kasapidis said accountants had a role to play in communicating changes to clients.
“It’s important for practitioners to let their clients know about the changed methods and record-keeping requirements,” she said. “Daily diaries and invoices will be required in case the ATO checks your claim. Depreciating assets like IT equipment and furniture now need to be claimed separately.”
She said some taxpayers would be better off using the actual expense method and because prices were rising quickly it was crucial that the ATO reacted.
“With increasing energy costs and the impact of inflation, it’s important that the ATO continue to monitor and adjust the amount of the revised fixed rate in line with price rises.”
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