As we noted in a previous newsletter, the ATO has now confirmed a new fixed rate working from home deduction amount of $0.67 per hour for the 30 June 2023 financial year, up from $0.52 for the 2022 year and earlier. Please note that this is a different method of claiming working from home costs to the COVID-19 Shortcut Method which previously allowed a deduction of $0.80 per hour and which ended on 30 June 2022.
As with everything tax-related, specific rules apply and you are only eligible to claim a set rate working from home deduction if you:
- incur additional running expenses as a result of working from home. For example, if you’re working in a room separate from someone else who is also working from home, or in an area separate from where your family might be watching television;
- have a record of the total number of hours you work from home. The ATO is suggesting that record keeping on this front should be kept “contemporaneously”. That is, each week that you work from home, you should be recording in a diary, calendar or spreadsheet precisely how many hours you worked at home versus at work. It shouldn’t be something you “create” at the last minute, and it should be a record you keep for a minimum of five years from the date your 2023 tax return is lodged;
- have a record of the expenses you incur while working at home. The Tax Office has advised that one invoice/bill for each utility will suffice as evidence, so if you’re incurring additional costs in running overhead lighting, accessing the internet, using your mobile phone, or towards your heating/cooling, you’ll need to keep aside one bill for each in this financial year, to help substantiate your costs; and
- have records for any expenses the fixed rate per work hour doesn’t cover. For instance, the work-related use of computers or laptops, printers, tablets, office furniture and so on.
Like the previous Shortcut Method, you no longer need to have a dedicated home office in order to make a claim. However, the work you do from home must be more significant than responding to the occasional email or making ad hoc phone calls. Please also note that if you’re claiming working from home expenses, unless you work multiple or different jobs, the Tax Office would subsequently expect to see a reduction in things like laundry claims and motor vehicle deductions.
Asked & Answered
Question: I’ve seen a few news articles about HECS debts lately and how some people are worried that the interest charged on them this year is going to make paying off the loan impossible. I went to university in 2007 and graduated in 2010 with an Associate Degree. I haven’t really thought about my HECS debt since and couldn’t even tell you what I owe. Should I be worried?
Answer: A lot has been said about HECS/HELP in the past few months and so we’re not surprised that more people are paying attention and asking questions.
Firstly, if you have a student loan debt but don’t know precisely how much you owe, we recommend contacting us for help accessing the information or logging into your myGov account and accessing the ATO’s online services that way. You’ll find information on your outstanding balance on your homepage, under the “Loan account” heading.
Secondly, whether you should be worried depends on your unique situation. As we do not hold an Australian Financial Services License, we cannot offer you financial advice, but we can give you some things to consider.
- How much do you owe?
- What is your taxable income per year? Do you fall into a compulsory repayment threshold?
- Are you currently making, or do you intend to make, any voluntary loan repayments? If so, note that indexation is charged on the 1st of June each year and so you’ll want to make any voluntary repayments well before that date to give the ATO time to deduct them from your loan balance.
- Are you about to apply for a home loan or any other form of finance?
- Is there somewhere else your money might be better applied than towards your student loan debt? For example, do you have any credit card or personal loan amounts owing? Do you have an emergency fund?
While students have been told for years that HECS/HELP debts are the best debts they’ll ever incur, increasingly, lenders are seeing them as a problem and people are being told to either pay off or pay down their loans, or consolidate the debt by way of a mortgage refinance or similar.
For loan serviceability purposes, lenders factor into account a 3.8% per month outgoing on your total student loan balance (and all credit card limits, for the record), regardless of whether you are actually outlaying that money. For example, if you were to owe $30,000 in HECS/HELP, your prospective lender would consider you to have a regular outgoing of $95 per month, even if you’re not currently obliged to make HECS/HELP repayments. That works against your serviceability, which is why more people are reviewing their student loan situations and weighing up their options.
Also, it’s important to remember that HECS/HELP debts are no longer forgiven on death, so if you don’t actively manage your liability and something happens to you, it’s your estate that then needs to cough up the cash. Depending on your unique circumstances, that could be a problem.
To help you make a decision as to whether or not you should make a voluntary repayment, the March 2023 indexation figures were announced at the time of writing this and it looks as though HECS/HELP debts will be indexed by 7.1% this year. On a $30,000 loan, that means an increase of $2,130.
As to whether or not you should be worried about your loan balance, you might be interested in the following list of Australia’s largest HECS/HELP debt balances as per a recent ATO Freedom of Information request.