PCG 2023/1: Claiming a deduction for additional running expenses incurred while working from home - ATO compliance approach
Document type: Final PCG
Status: Current
Date of issue: 16 February 2023
Date of effect: 1 July 2022

1. Prior to 1 July 2022, to calculate a deduction for expenses incurred as a result of working from home, taxpayers [1] had the choice of using one of the following methods: 2. From 1 July 2022, taxpayers can continue to claim their actual expenses or, alternatively, they can use the fixed-rate method outlined in paragraphs 23 to 26 of this Guideline. 3. This Guideline outlines the fixed-rate method for calculating the work-related additional running expenses [4] incurred as a result of working from home. It should be read in conjunction with Taxation Ruling TR 93/30 Income tax: deductions for home office expenses, which explains when working from home expenses are deductible. 4. If, on reviewing your deduction for additional running expenses, you are found to have satisfied the requirements set out in paragraph 27 of this Guideline, the Commissioner will not have cause to apply additional compliance resources to reviewing your deduction. 5. If you are found not to have satisfied the requirements set out in paragraph 27 of this Guideline, you will not be able to use the fixed-rate method to calculate your expenses. You will only be able to claim a deduction for your actual expenses. This means you must keep adequate records from the start of the income year to demonstrate: 6. Irrespective of paragraph 5 of this Guideline, if you lodge an objection [6] in relation to your working from home expenses for whatever reason, you cannot rely on using the fixed-rate method in this Guideline to determine whether you are entitled to a deduction for your expenses. Only the actual expenses you incurred as a result of working from home and for which you have adequate records will be allowed as a deduction. [7] 7. This Guideline does not cover occupancy expenses such as rent, mortgage interest, property insurance and land tax. For further information on when you can claim a deduction for and how to apportion occupancy expenses, refer to TR 93/30. 8. All legislative references in this Guideline are to the Income Tax Assessment Act 1997, unless otherwise indicated.

Scope: 18. You can rely on this Guideline to calculate your deduction for additional running expenses using the method outlined at paragraphs 23 to 26 of this Guideline if you are: 19. You do not need to have a separate home office or dedicated work area set aside in your home in order to rely on this Guideline. 20. If more than one taxpayer in your household is working from home at the same time, each taxpayer will be able to rely on this Guideline only if each of those taxpayers meets all the requirements set out in paragraph 18 of this Guideline. 21. Taxpayers working in the same household at the same time can choose which method they will use to calculate their expenses  fixed-rate method or actual expenses. If a taxpayer chooses to calculate their deduction using the actual expenses method, they will need to ensure that they have applied an appropriate apportionment methodology which isolates their individual component of expenses. [12] 22. If you do not use the fixed-rate method, you need to use the actual expenses method to claim a deduction for the additional expenses you incur as a result of working from home. Fixed-rate method 23. The fixed-rate method apportions the following additional running expenses you incur on a fair and reasonable basis by using a fixed rate for each hour you worked from home during the income year: 24. The fixed rate per hour calculates the total of your deductible expenses for energy, internet, mobile and home phone usage, and stationery and computer consumables for the income year. [13] 25. This means you cannot claim an additional separate deduction for any of these expenses. For example, if you use your mobile phone when you are working from home and when you are working from somewhere other than your home, your total deduction for mobile phone usage expenses for the income year will be covered by the hourly fixed rate. [14] 26. To calculate your total deduction for running expenses using the fixed-rate method, you: Fixed rate 26A. The fixed rate for each income year is set out in the following table.

9. To be deductible under section 8-1, a working from home expense must be: 10. Further, the expense must not be: 11. Although expenses of capital or of a capital nature are not deductible under section 8-1, a decline in value deduction is allowable under section 40-25 for depreciating assets that are used for the purpose of producing assessable income. [9] 12. Where an expense is only partly incurred in gaining or producing your assessable income, it must be apportioned. Where there is no obvious method of apportioning expenses, it must be done on a fair and reasonable basis. [10] 13. Expenses associated with your home are inherently private and domestic in nature and generally are not deductible. An exception is where you incur additional running expenses as a direct result of working from home. Such expenses are additional to your private and domestic expenditure in relation to your home. 14. The practical compliance approach outlined in this Guideline overcomes difficulties associated with apportioning and calculating the additional expense you actually incur as a result of working from home in respect of: 15. The actual decline in value deduction for the depreciating assets used while working from home (for example, a computer or similar electronic device, desk and office chair), along with any other running expenses not outlined in paragraph 14 of this Guideline, can be claimed separately, provided the requirements of section 8-1 and Divisions 40 and 900, or section 262A of the Income Tax Assessment Act 1936 (ITAA 1936), are satisfied.

Intro: 27. The Commissioner will not have cause to apply compliance resources [17] to review your deduction for working from home expenses if: 28. This Guideline does not apply to you if:

Example 1:  using the practical compliance approach 29. Gerry is employed as a bookkeeper. He goes into the office to work 3 days a week and works from home 2 days a week. When he is working from home, Gerry uses his employer-provided laptop, his home internet connection and his personal mobile phone. He also turns on the light and the air conditioning or the ceiling fan in the room in which he is working. The cost of the chair and desk that Gerry uses was reimbursed by his employer. 30. As Gerry uses his employer-provided laptop, he is not entitled to claim a decline in value deduction for it. Gerry also cannot claim a decline in value deduction for the chair and desk he uses at home. 31. During the 202425 income year, Gerry keeps and retains all relevant records. Based on his record of hours, Gerry worked from home for 768 hours during the income year. 32. As Gerry meets all the criteria in paragraph 18 of this Guideline, he decides to calculate his working from home expenses using the fixed-rate method. He calculates his deduction as: 33. No additional amount is added to the hourly rate as Gerry is not entitled to a decline in value deduction for any of the depreciating assets he uses when he works from home. [20] 34. In his tax return for the 202425 income year, Gerry claims a deduction of $537 for his working from home expenses. | Example 2:  cannot rely on the practical compliance approach 35. Dan is employed as a financial adviser. Under the terms of his employment agreement, Dan must be in the office at least 3 days per week and can either work in the office or from home for the other 2 days per week. Dan only works from home if he does not have client meetings, so he does not always work 2 days per week from home. 36. In his tax return for the 202425 income year, Dan claims a deduction of $838 for his working from home expenses using the fixed-rate method. 37. In February 2026, Dan's claim for his working from home expenses for the 202425 income year is subject to review by the ATO. When he responds to the request to substantiate his claim of $838, Dan sends a document setting out the following calculation: 38. Dan does not provide any records to demonstrate that he worked from home for 784 hours during the income year, nor does he provide any evidence to show he incurred any running expenses. However, he does provide his purchase receipt for the chair that shows it was purchased on 10 December 2024 for $290. 39. When questioned about how he calculated the number of hours he worked from home, Dan indicates that he estimated that he worked from home on average for 2 days each week for around 8 hours a day and that he had 3 weeks' leave during the year. In relation to his running expenses, Dan indicates he incurred electricity, internet and mobile phone expenses and that he might have some documents to demonstrate he incurred them but he would need to look for them. 40. When Dan is asked if he was able to locate one bill for his electricity, internet and mobile phone expenses, Dan indicates that he has been able to locate a mobile phone and internet bill but not any of his electricity bills. However, Dan is able to provide one of his credit card statements showing a payment to an electricity provider on 10 February 2025. 41. Dan cannot rely on the practical compliance approach because he has not kept a record of the hours he worked from home during the income year. Instead, an estimate was provided. 42. However, Dan can claim the actual expenses he incurred as a result of working from home. Based on the evidence Dan has been able to provide, his only deduction will be for his office chair. As the office chair costs less than $300 and was only used for work purposes, Dan's deduction for working from home expenses is reduced from $838 to $290. 43. If Dan objects to his Notice of Amended Assessment for the 202425 income year, he is not able to use the fixed-rate method as the basis for his objection. He must use the actual expenses method. The objection would only be allowed if he is able to substantiate that these expenses were incurred as a result of working from home. Explanation of criteria 44. The remainder of this Guideline explains the criteria outlined in paragraph 18 of this Guideline and includes a full worked example which sets out how to calculate your additional running expenses using the fixed-rate method. First criterion  working from home 45. To satisfy this criterion, you must be working from home while carrying out your employment duties or while carrying on your business on or after 1 July 2022. The work has to be substantive and directly related to your income-producing activities. As such, minimal tasks such as occasionally checking emails or taking phone calls while at home will not qualify as working from home for the purposes of subparagraph 18(a) of this Guideline. | Example 3:  not working from home 46. Amanda is employed as a paramedic. Her rosters are sent to her by email each week. If Amanda does not check her roster while she is on duty at her usual station, she checks the roster at home using her laptop. 47. This would not qualify as working from home as Amanda only occasionally uses her laptop to check her roster for the upcoming week. As such, this Guideline will not apply to Amanda. | Example 4:  working from home 48. Zachary is employed as a salesperson. He works from his employer's office 4 days per week and he works from home one day per week. Zachary does not have a separate room in his house set up as a home office. He works at a desk in his lounge room. Zachary is working from home one day per week when he is working in his lounge room and can rely on this Guideline if he meets the other criteria outlined in paragraph 18 of this Guideline. Second criterion  incurring deductible additional running expenses 49. To satisfy this criterion, you must incur one or more additional running expenses of the kind outlined in paragraph 23 of this Guideline which are deductible under section 8-1 as a result of working from home. You do not have to incur every running expense listed at paragraph 23 of this Guideline. An additional running expense will be incurred when the amount of the expense is actually paid or a definitive obligation to pay the amount of the expense arises. [22] 50. In circumstances where a third party (for example, your employer) reimburses you for all your additional running expenses or is incurring all the additional running expenses on your behalf, you will not satisfy this criterion. 51. Records of the hours you worked from home during the income year and invoices or bills [23] in the name of the home owner or service recipient represent evidence that additional running expenses have been incurred. Where invoices and bills are in the name of one member of the household but the cost is shared, each member of the household who contributes to the payment of that expense will be taken to have incurred it. For example, this can include family circumstances such as a husband and wife, or where 2 unrelated parties share accommodation and both contribute to the cost of expenses jointly. This does not include paying board as these arrangements are generally private in nature. | Example 5:  incurring additional running expenses 52. Pierre runs a plumbing business. When he gets home each day, he sends out invoices to his clients, calls clients, orders or purchases parts that he will need for certain jobs he has booked in, checks his bank account for client payments and emails a reminder to clients whose payments are overdue. He does this work using his computer, his home internet connection and his mobile phone. Pierre's mobile phone bill is in his name so he has incurred the expense. However, his electricity bills are in his partner's name and the internet bill is in his and his partner's name. All of Pierre's household expenditure is paid from a joint bank account, so Pierre is considered to have incurred the electricity and internet expenses as well. 53. If Pierre meets the other requirements in paragraphs 18 of this Guideline, he can rely on this Guideline to calculate his additional running expenses. | Example 6:  not incurring additional running expenses 54. Sergei is employed as a graphic design artist. He works in the office 3 days per week and works from home 2 days per week. Sergei lives with his parents and when he works from home, he works in his bedroom using his employer-provided laptop and mobile phone. Sergei does not pay his parents any rent and he does not contribute to any of the household bills. 55. Although Sergei is carrying out his employment duties while working from home, he is not incurring additional running expenses. Accordingly, Sergei is not entitled to a deduction for additional running expenses and he cannot rely on this Guideline. Third criterion  keeping and retaining relevant records 56. To satisfy this criterion and to rely on this Guideline, you must keep: 57. If, in addition to the fixed rate per hour outlined in subparagraph 26(a) of this Guideline, you are claiming a deduction for the decline in value of depreciating assets used while working from home, you must keep: Hours worked 58. For the 202324 and later income years, you must keep a record for the entire income year of the number of hours you worked from home during that income year. An estimate for the entire income year [29] or an estimate based on the number of hours you work from home during a particular period and applied to the rest of the income year will not be accepted. A record of your hours for the income year can be in any form, provided it is kept contemporaneously. For example, records may be kept in one of the following forms: 59. For the 202223 income year only, you need to keep: Running expenses covered by rate per hour 60. You must also keep evidence, as outlined in paragraphs 61 and 62 of this Guideline, for each of the additional running expenses [30] that you incurred. [31] The documents you need to keep to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense. 61. For energy, mobile and home phone usage and internet expenses, you must keep one monthly or quarterly bill. [32] If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses  for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others. 62. For stationery and computer consumables, which are occasional expenses, you must keep one receipt for an item purchased. 63. If you do not keep evidence of the total hours you worked from home and for each of the running expenses you incurred, you will not be able to rely on this Guideline to calculate your additional running expenses. Decline in value 64. As the decline in value of depreciating assets is not covered by the fixed rate per hour outlined in paragraph 26A of this Guideline, to claim a deduction for decline in value you must keep the written evidence required by Division 900 and also section 262A of the ITAA 1936. [33] 65. For each depreciating asset used as an employee to carry out your employment duties, you must keep a document which shows the: 66. If the document given to you by the supplier does not specify the nature of the asset, you may write in the missing details yourself before you lodge your tax return for the income year in which you first claim a deduction for the decline in value of the asset. [35] You must also keep records which demonstrate your work-related use of the depreciating asset. This can be evidenced by records of a representative 4-week period that show personal and income-producing use of the depreciating assets. 67. For depreciating assets used in carrying on a business, you must keep records that record and explain all transactions. [36] These records include any documents that are relevant for the purpose of ascertaining your expenditure and documents containing any election, choice, determination or calculation and particulars showing the basis of any calculations made. [37] | Example 7:  keeping and retaining relevant records 68. Pamela is employed as a solicitor. She works from home some evenings or on the weekend, in order to meet deadlines. The number of hours Pamela works from home varies from week to week. 69. During the income year, Pamela keeps a record of the total number of hours she spends working from home. She does this by making an entry in her electronic calendar when she starts and finishes working from home on a particular day. 70. When she is working from home during the income year, Pamela incurs electricity and internet expenses. Pamela is also claiming the decline in value of a desk and a laptop computer she uses when she works at home. 71. To show she has incurred additional running expenses, Pamela keeps: 72. Pamela has kept relevant records for the income year. If Pamela meets the other criteria in paragraph 18 of this Guideline, she can rely on this Guideline to calculate her additional running expenses. Worked example 73. A full worked example has been set out in paragraphs 74 to 89 of this Guideline to assist you in determining whether you can apply the practical compliance approach outlined in paragraph 27 of this Guideline. | Example 8:  employee who meets requirements and uses the fixed-rate method 74. Piruntha is employed as software engineer. In November 2024, Piruntha's employer decides to give their employees some flexibility by allowing them to work from home. However, each employee must work from the office at least 3 days per week. Piruntha decides to take advantage of this arrangement and work at the office 3 days per week and from home 2 days per week. To work from home, Piruntha sets up a room in her home as an office. 75. On 1 December 2024, Piruntha purchases a laptop for $1,499, a desk for $250 and an office chair for $299. She also purchases some stationery to use while she is working from home. 76. On 6 December 2024, Piruntha commences working from home. When working from home, she uses the lights in her home office, as well as her laptop, her personal internet connection and her personal mobile phone (which she also uses when she is working at her employer's office and for private purposes). 77. Up until the end of February 2025, Piruntha uses her air conditioning to cool her home office and from around April 2025 until 30 June 2025, she uses her gas heating to warm the room. 78. Piruntha keeps a record of the time she spends working from home during the 202425 income year, which shows she worked a total of 560 hours at home. For a representative 4-week period, Piruntha keeps records which show that she uses her laptop, desk and office chair for around 5 hours per week while she is gaming and internet shopping and around 20 hours per week for work purposes. 79. Piruntha also keeps one quarterly invoice for her electricity and gas expenses, one monthly internet bill and one monthly mobile phone bill for the period 6 December 2024 to 30 June 2025. She also keeps the receipt for the stationery she purchased on 1 December 2024. 80. At the end of the 202425 income year, Piruntha determines that she meets all the criteria set out in paragraph 18 of this Guideline because she: 81. As such, she decides to calculate her additional running expenses using the fixed-rate method. 82. First, Piruntha multiplies the total number of hours she worked from home by the hourly rate. Her calculation is: 83. This is Piruntha's deduction for her electricity, gas, mobile phone, internet and stationery expenses. 84. As the desk and office chair Piruntha purchased cost less than $300, she can claim the full purchase price of them in the 202425 income year. However, she must reduce her deduction for her private use of those items. [38] Piruntha works out her private and work-related use of her depreciating assets as follows: 85. The decline in value deduction (related to her work-related use) for the desk and chair is: 86. To calculate the decline in value of her laptop, Piruntha uses the depreciation and capital allowances tool on the ATO's website and chooses to use the diminishing value method. The tool calculates the decline in value of the laptop as: 87. To work out the total amount of her deduction for the additional running expenses she incurred as a result of working from home during the 202425 income year, Piruntha adds the amount calculated using the hourly rate to the work-related decline in value of her laptop, desk and chair. This is calculated as: 88. When she lodges her 202425 tax return, Piruntha includes a deduction of $1,527 for her working from home expenses at the other work-related expenses question. 89. Even though Piruntha also uses her personal mobile phone for work when she is in the office, she cannot claim any additional deduction for this work-related use of her phone in her 202425 tax return.



What this Guideline is about | Who can rely on this Guideline | This Practical Compliance Guideline sets out a practical administration approach to assist taxpayers in complying with relevant tax laws. Provided you follow this Guideline in good faith, the Commissioner will administer the law in accordance with this approach. | Date of effect: 16. This Guideline applies from 1 July 2022. | 17. For the 202223 income year and later income years, taxpayers can no longer rely on the information previously included in PS LA 2001/6 under the heading '5. Special rules for home office running expenses' to calculate their deduction for expenses incurred as a result of working from home. | 768 hours × 70c per hour = $537. [19] | Hours worked from home = 2 days per week × 8 hours per day × 49 weeks = 784 hours | Additional running expenses = 784 hours × 70c per hour = $548 [21] | Total deduction = $548 + $290 = $838. | 560 hours × 70c per hour = $392. | Time spent using assets for work = 20 hours per week | Time spent using the assets for private purposes = 5 hours per week | Total hours assets used per week = 25 hours | 5 hours per week ÷ 25 hours per week = 20% private use | 20 hours per week ÷ 25 hours per week = 80% work-related use. | Decline in value (using diminishing value method) | Deductible decline in value | Adjustable value at end of year | $392 + $200 + $239.20 + $696.52 = $1,527. [39] | Commissioner of Taxation 16 February 2023 | New paragraph 26A inserted to list applicable fixed rates by year. | Paragraphs 23, 24, 25, 26, 31, 32, 34, 36-38, 40, 42, 43, 57, 64, 74-80, 82, 84 and 86-89 | Updated for the new fixed rate of 70c effective 1 July 2024, including examples. | Moved from paragraph 23 to paragraph 24. | Paragraphs 2, 3, 5, 6, 21, 22, 23, 26, 27, 32, 36, 43, 44, 57, 64 and 81 | Heading before paragraph 23 | Deleted the word 'revised' from references to 'revised fixed-rate method' and 'revised fixed rate'. | Paragraphs 14, 23, 24, 25 and 61 | Inserted 'usage' after references to 'mobile and home phone' to make it clear that this doesn't include the decline in value of a mobile phone handset. | Various minor grammatical changes and updates in line with current ATO style and accessibility requirements. | A minor update to clarify the availability of the fixed-rate method in circumstances where some, but not all, additional work from home expenses have been paid or reimbursed by the employer. | Previously issued in draft format as PCG 2022/D4 | Related Rulings/Determinations: TR 93/30 TR 97/7 TR 2011/5 TR 2020/1 | Legislative References: ITAA 1936 262A ITAA 1936 262A(1) ITAA 1936 262A(2) ITAA 1997 8-1 ITAA 1997 Div 40 ITAA 1997 40-25 ITAA 1997 40-25(2) ITAA 1997 40-80(2) ITAA 1997 Div 900 ITAA 1997 900-120(2) ITAA 1997 900-120(3) TAA 1953 Sch 1 388-85

Related rulings and determinations: PS LA 2001/6 | TR 2011/5 | TR 2020/1
Legislative references: Case References: Kidston Goldmines Ltd v Commissioner of Taxation [1991] FCA 351 30 FCR 77 91 ATC 4538 22 ATR 168
Other references: Actual cost method Depreciation and capital allowances tool Guide to depreciating assets PCG 2020/3 PS LA 2001/6