Australians face smaller tax deductions this year and many could miss out on claiming work-from-home expenses as key rule changes fly under the radar, tax experts warn.

Accountants fear new record-keeping rules for Australians working from home (WFH), unveiled last month, have not been noticed by taxpayers, especially the need to keep a daily diary.

From March, workers must log their remote work hours to claim expenses like utility and internet bills, under a revised fixed-rate method that is replacing the COVID-era shortcut.

But Mark Chapman, director of tax communications at H&R Block, doubts most taxpayers are aware of more stringent record-keeping rules.

Mr Chapman said it “didn’t make any sense” to change the WFH rules  in February when Australians weren’t thinking about their taxes.

“This comes down, simply, to bad timing from the ATO,” he told The New Daily. “The vast majority of taxpayers don’t really concentrate on tax until tax time.”

“We’re going to get to tax time and people are going to try to lodge and they won’t have kept records for the previous year – therefore they can’t make a claim.”

Smaller returns predicted

Mr Chapman also believes the reforms will lead to smaller tax returns for those that manage to claim WFH expenses, partly because expenses such as phone bills can’t be claimed separately.

“Because of that you’ll often see quite substantial reductions over using the old 52-cent method, plus mobile phone expenses,” he said.

“You’re potentially going to lose out quite substantially using the revised fixed-rate method … returns will go down this year, inevitably.”

Accountant Lisa Greig of Perigee Advisers agreed the tax changes will deliver smaller returns.

Tax returns hit record levels during COVID lockdowns as millions made WFH claims and took advantage of low- and middle-income tax offset (LMITO) extensions designed to support the economy through the pandemic years.

“There’s a whole clean up from the amnesty that was called COVID, where the tax office was basically Centrelink, giving out money,” Ms Greig said.

“They’re now going, ‘we have to curb back all these attitudes’.”

Survey findings from CPA Australia this week show about 75 per cent of people hope to claim WFH expenses on 2022-23 returns, while 8 per cent will opt out amid the latest ATO changes.

CPA Australia senior manager tax policy Elinor Kasapidis said some Australians are in for a surprise at tax time.

“For many the shortcut method introduced during COVID is the only way they know,” she said.

“The revised fixed-rate method has differences, but fundamentally, record keeping is the most important thing … you have to keep a daily record, clearly, of the hours you work from home.”

Employer records accepted

Employers can play a key role in helping workers retrieve records of hours they are contracted to work from home, through timesheets or rostering information collected, Mr Chapman said.

The ATO confirmed to TND that such evidence is acceptable, saying, “these records must be made at the time the taxpayer is working from home”.

The ATO has resisted suggestions from accountants that the new fixed rate method comes with more stringent record-keeping requirements, saying “taxpayers have always needed records to claim WFH expenses”.

However, accountants told TND that those who used the shortcut method during the pandemic were not completing daily diaries throughout the work year, making this a significant change.

Record-keeping requirements aren’t the only change under the revised WFH method, either.

Taxpayers will now also need to claim depreciation on their remote office expenses, such as computer equipment, separately. A record of utility bills will also be required to make claims.

Accountants brace for ‘dog’s breakfast’

Ms Greig said the timing of the WFH deduction changes have irked tax agents, who are now bracing for a “dog’s breakfast” this end of financial year when people try to claim without diaries.

“For them to make this change halfway through the year … even though they had signalled it, our clients aren’t going to be that savvy with it all,” Ms Greig said.

The ATO has started what it described as a “comprehensive marketing campaign” about the new work-from-home deduction method and created a grace period that will allow taxpayers to submit representative diaries of their remote work hours from July 1, 2022 to February 28, 2023.

Earlier messages last year had urged the importance of record keeping as the shortcut ended.

“We are continuing, and will continue, to provide updates in the lead up to tax time this year,” an ATO spokesperson said.