Accountants call for permanent WFH tax deductions similar to cents-per-kilometre car claims

The federal government should legislate a standard tax deduction for work-from-home (WFH) expenses, mirroring how drivers are reimbursed for every kilometre they cover for work, according to CPA Australia.

In its new 2023-24 pre-budget submission, the accounting group says new legislation covering WFH deductions would provide “certainty and clarity” for both the Australian Taxation Office (ATO) and taxpayers alike.

At the turn of the last financial year, taxpayers choose between a patchwork of deduction schemes covering the expenses of work conducted from home.

Under the fixed rate method, taxpayers can claim a flat 52 cents per hour worked from home, in addition to other job-related expenses like phone and internet bills, and the decline in value of depreciating assets, like a new laptop.

Alternatively, taxpayers can calculate their actual costs, including the percentage of rent, power bills, and cleaning expenses covering their ‘dedicated’ working area at home.

And until June 30, 2022, taxpayers could claim a flat 80-cent deduction for all hours worked from home, a simplified measure designed to cover the massive influx of workers forced out of the workplace by COVID-19 restrictions.

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Now, the ATO advises workers who previously relied on the ‘shortcut’ method to keep records of all hours worked from home, receipts for depreciating assets, and logs of all personal and work-related use of relevant assets.

CPA Australia argues a new, simplified method to calculate those deductions, enforced by legislation, would make life easier for taxpayers and the ATO.

“This should be similar to the cents-per-kilometre method for motor vehicle expenses,” CPA Australia states.

“This measure should also address the current uncertainty about the ability to deduct WFH expenses without a dedicated space, absent the revised fixed rate,” its submission adds.

Rebooting the policy is appropriate given the number of Australians working from home on a consistent basis, says Elinor Kasapidis, senior manager of tax policy at CPA Australia.

“More Australians are working from home now than before the pandemic,” she told SmartCompany.

“Many workplaces have decided to make flexible working conditions permanent for their staff.

“We need expense methods to stay up to date with the demands of a modern workforce.”

Legislating the measure could also avoid headaches for taxpayers required to ‘show their work’ for prior claims.

“The biggest risk to taxpayers is that when they get audited and the ATO disallows their claim, they can’t use the revised fixed rate anymore, they have to go to their actual costs,” Kasapidis said.

Beyond the potential time-saving benefits, enshrining a new WFH deduction scheme would likely have a small but meaningful effect on how the business community approaches remote work in the long term.

As per-kilometre deductions have been accepted by businesses as standard practice, a boilerplate model for WFH deductions could feasibly provide institutional support for the model.

Lawmakers appear on board with the continued adoption of remote and hybrid work practices.

Taking to Twitter on Tuesday, Assistant Minister for Competition, Charities and Treasury Andrew Leigh cited recent research showing working from home saves the average Australian worker around 78 minutes per week.

Data from the US National Bureau of Economic Research shows Australian remote workers put 43% of time saved by not commuting back to work, with 33% going to leisure, and 9% to caregiving.