The Australian Taxation Office (ATO) has announced changes to the way in which home-based business expenses can be claimed for the 2022-23 income year. These changes affect how individuals can claim expenses and the records they need to keep.
What expenses can be claimed?
If an individual operates their business from home, they may be able to claim the business-use portion of expenses incurred. These expenses can be categorized into two types: occupancy expenses and running expenses.
Occupancy expenses refer to expenses related to the property, such as mortgage interest or rent, council rates, land taxes, and home insurance premiums. Running expenses refer to the day-to-day running of the business, such as electricity, gas, phone, internet, stationery, cleaning, and the decline in the value of assets.
Temporary shortcut method ended
Previously, individuals could claim their home-based business expenses using either the actual expenses method or the temporary shortcut method. The temporary shortcut method allowed individuals to claim a rate of 80 cents per hour for all home-based business expenses. However, this method ended on 30 June 2022.
Revised fixed rate method introduced
The ATO has introduced a revised fixed rate method for home-based business expenses for the 2022-23 income year. Under this method, individuals can claim a fixed rate of 67 cents per hour for all home-based business expenses. This rate covers all running expenses and the decline in the value of assets. The revised fixed rate method eliminates the need for individuals to work out the business-use portion of phone, internet, gas, and electricity separately.
Dedicated home office space no longer required
One of the benefits of the revised fixed rate method is that individuals no longer need to have a dedicated home office space to claim their home-based business expenses. This means that individuals who work from their kitchen table or couch can still claim their expenses.
Record-keeping requirements
If an individual wishes to use the revised fixed rate method, they must keep a record of all hours worked from home for the entire income year. This can be done using a timesheet, roster, or diary. If an individual has not kept a record of their hours worked from home, they can use a representative record of their hours from 1 July 2022 to 28 February 2023. They will need a record of the total number of their actual hours worked from 1 March to 30 June 2023.
Business structure considerations
An individual’s business structure can affect the method they can use and the expenses they can claim. For example, if an individual operates their business as a sole trader, they can claim all of their home-based business expenses. Meanwhile, if an individual operates their business through a company or trust, they can only claim home-based business expenses if they have an office set up in their home.
Seek professional advice
It is important for individuals to seek the advice of a tax professional or BAS agent to ensure that they are claiming their home-based business expenses correctly. These professionals can help individuals determine which method is best for them and ensure that they are meeting all the record-keeping requirements.
In conclusion, the ATO’s changes to home-based business expenses provide more flexibility for individuals to claim their expenses. The revised fixed rate method eliminates the need for a dedicated home office space and simplifies the record-keeping process. However, individuals need to seek professional advice to ensure that they are claiming their expenses correctly.
