Following harsh criticism of its November draft guidance on work-from-home (WFH) expense deductions, the Australian Tax Office (ATO) is soon expected to publish its final guidelines. Despite not having finalised the changes, the new PCG rules are already in effect.
Tax professionals had lambasted the earlier draft that proposed changes to the fixed rate method and a revised fixed rate of 67c. The suggested calculations were termed opaque and the new record-keeping requirements were deemed demanding. The changes would apply to taxpayers that previously utilised the shortcut method, requiring them to keep a record of their hours worked at home, logs of personal and work-related use of relevant assets, and receipts of depreciating assets.
In its budget submission, CPA Australia recommended a legislated fixed rate method for WFH expenses. An approach similar to the cents per kilometre method applied to motor vehicle expenses. According to the association, this approach would help bring certainty and clarity to the ATO and taxpayers on how to deduct WFH expenses, even without a dedicated workspace.
Senior manager of tax policy at CPA Australia, Elinor Kasapidis, said that with more people working from home than before the pandemic, it was necessary to adopt expense methods that kept up-to-date with the demands of the modern workforce. A legislated fixed rate would be less stressful to taxpayers who would be required to show their work for prior claims. She added that if taxpayers were audited and their claims disallowed, they would have to dig into their actual costs.
H&R Block’s director of tax communications, Mark Chapman, has said that the amount that can be claimed as per the new guidelines is low and the compliance obligations are high. He pointed to such problematic rules as keeping a record of time spent working from home, alongside invoices or receipts for each additional expense like electricity bills.
Although the new rules took effect on January 1, many taxpayers are believed to be unaware of the changes. The ATO has announced that they will be undertaking a publicity campaign once the rules are finalised to assist taxpayers and advisers. Communication will be carried out via various channels and will continue from when the final PCG is published to the period during which lodgement of 2023 income tax returns will be done.
The ATO has also said that the campaign will be supported by various guidance materials including web content and fact sheets. Tax professionals will be able to use these materials to communicate the changes to their clients. Tax professionals involved in the consultation process of the guidelines have also assisted in the development of these materials.
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