ATO expands fixed rate WFH deductions to 70c per hour

Taxpayers claiming deductions for home office expenses could receive a little more this financial year, after the Australian Taxation Office (ATO) bumped the popular fixed rate deduction to 70 cents per hour.

The tax office quietly updated its WFH compliance guidelines on Wednesday last week, lifting the fixed rate deduction from 67 cents an hour.

This means from July 1, 2024, taxpayers using the fixed rate method can claim an extra 3 cents per hour worked from home.

A full-time worker who operates from their home office 230 days a year could expect to claim $1,288 under the adjusted method -- nearly $60 more than under the prior 67 cents per hour rate.

The fixed rate method, introduced in the 2022-23 financial year, allows taxpayers to bundle hard-to-calculate phone, internet, and energy expenses into a streamlined deduction.

But accessing the fixed rate method is contingent on keeping a detailed log of each hour worked from home in the relevant financial year.

This can take the form of timesheets, rosters, or a diary updated each day to reflect on-site or WFH arrangements.

Taxpayers must also keep at least one invoice, bill, or credit card statement for their additional running expenses incurred through the financial year.

Taxpayers can still access the actual rate deduction method, allowing deductions for the specific cost of those ongoing expenses.

Large purchases and fees like new computers, work-related training courses, union dues, and home office furniture can be deducted separately under either method.

Work-related assets under $300 can be instantly deducted, with more expensive assets subject to depreciation schedules.

The subtle update to the ATO's fixed rate rules coincides with a new federal Labor plan to further simplify WFH tax deductions.

If re-elected at the May 3 poll, a Labor government pledges to legislate a new, blanket $1,000 deduction for WFH expenses.

Under that plan, taxpayers will not need to preserve receipts to prove their purchases under the $1,000 threshold.

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