Taxpayers could soon be dealing with more paperwork at tax time, or facing the prospect of a lower tax deduction for work from home (WFH) expenses. The ATO has recently proposed a new revised fixed rate method of calculating WFH expenses for the purposes of claiming a tax deduction from 1 July 2022.
The proposed new rate of 67c per hour would replace the previous shortcut method of 80c per hour (which many people have been using during the Covid-19 pandemic) as well as the previous fixed rate method.
TIP: It’s important to note that this proposal comes from the ATO (which does not itself create the tax law) and is still at the draft stage. The ATO is asking for submissions from interested parties
Before 1 July 2022, people working from home could use one of three methods for calculating a tax deduction for the expenses incurred:
Given the continual increase in energy bills and other inflationary pressures, this new proposed fixed rate method is likely to yield consistently lower deductions than if the actual cost method. Coupled with the abolition of the shortcut method, this seems to mean that taxpayers would either have to accept a lower WFH deduction in the coming years or deal with increased paperwork to be able to claim WFH deductions under the actual costs method.
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