Working From Home Deductions

Working from home deductions are a common area of confusion for clients—and a frequent source of errors. As a tax agent, your role is to help clients choose the correct method, maintain appropriate records, and avoid overclaiming.

This guide outlines how individuals and advisers can calculate working from home deductions and apply the rules in practice.

There are two methods available:

• Fixed rate method (from 1 July 2022)

• Actual cost method

👉 Only one method can be used per income year.

If you are working out your claim for 2021–22 or earlier income years, different rules applied (including temporary COVID methods).

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Choosing the Right Method

Before calculating anything, determine which method is appropriate.

Fixed rate method is generally suitable where:

• the client wants a simpler approach

• detailed expense tracking is not available

• running costs are relatively modest

Actual cost method may be more appropriate where:

• the client has higher working from home expenses

• there is a dedicated home office

• the client is willing to maintain detailed records

👉 The fixed rate method is simpler—but not always the best outcome.

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Fixed Rate Method

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Eligibility

To use the fixed rate method, the client must:

• incur additional running expenses as a result of working from home

• incur and be able to evidence that they have incurred running expenses covered by the rate (such as electricity, internet or phone expenses)

• keep a record of actual hours worked from home

• keep evidence that these expenses have been incurred

👉 Additional running expenses are costs that increase as a result of working from home (for example, additional electricity, internet or phone usage).

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How it Works

You can claim a fixed rate per hour worked from home, depending on the income year:

• 67 cents per hour for 2022–23 and 2023–24

• 70 cents per hour from 1 July 2024 (2024–25 onwards)

The rate includes the following additional running expenses:

• home and mobile internet or data

• mobile and home phone usage

• electricity and gas (heating, cooling and lighting)

• stationery and computer consumables

👉 These expenses cannot be claimed separately when using the fixed rate method.

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Expenses Not Included in the Fixed Rate

You can separately claim:

• work-related use of technology and office furniture (e.g. desks, chairs, computers, bookshelves)

• repairs and maintenance of these items

These are generally depreciating assets.

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Immediate Deduction

If an asset:

• costs $300 or less, and

• is mainly used for work

→ it can be claimed immediately.

Examples include:

• keyboards

• mouse

• power boards

• desk lamps

• chargers

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Decline in Value

You can claim decline in value if the asset:

• costs more than $300, or

• forms part of a set costing more than $300

Low-cost assets (under $1,000) may be allocated to a low-value pool (typically used in more complex situations).

Where assets are used for both work and private purposes, the deduction must be apportioned.

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Additional Claims (Limited Circumstances)

Where there is a dedicated home office, clients may also be able to claim:

• occupancy expenses (e.g. rent or mortgage interest)

• cleaning expenses

👉 A dedicated home office refers to a space used exclusively for income-producing activities and has the characteristics of a place of business, not merely a space used for working from home.

⚠️ Occupancy expenses are a high-risk area and generally only apply where the home is used as a place of business.

⚠️ Claiming occupancy expenses may also have capital gains tax (CGT) implications on sale of the home.

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Record Keeping (Fixed Rate Method)

Clients must keep:

• a record of actual hours worked from home for the full income year
  (e.g. timesheet, diary — estimates are not acceptable)

• at least one record for each type of running expense included in the rate
  to demonstrate the expense was incurred
  (e.g. electricity bill, phone bill, internet bill, stationery receipt)

Records must generally be retained for 5 years.

For depreciating assets, records must show:

• purchase cost

• work-related usage percentage

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Actual Cost Method

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How it Works

Under the actual cost method, you calculate the actual additional expenses incurred when working from home.

This includes:

• decline in value of depreciating assets (desk, chair, computer, etc.)

• electricity and gas

• phone, data and internet

• stationery and consumables

• cleaning of a dedicated home office

Where expenses relate to both work and private use, they must be apportioned on a fair and reasonable basis, supported by evidence where possible.

In limited circumstances, occupancy expenses may also be claimed (see notes above regarding risk, eligibility and CGT implications).

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Decline in Value of Depreciating Assets

• Immediate deduction if cost ≤ $300 and mainly used for work

• Otherwise, claim decline in value over the asset’s effective life

Example:
If an item costs $289 and is used 80% for work, the deduction is $231 in the year of purchase.

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Electricity and Gas

You can calculate energy costs using:

• cost per unit (from utility bill)

• appliance power consumption

• total hours worked from home

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Example: Ben

Ben worked 768 hours from home.

• Air conditioner usage: 1.09 kW per hour

• Electricity rate: $0.28 per kWh

Calculation:

• 1.09 × 0.28 = $0.3052 per hour

• 768 × 0.3052 = $234.39 deduction

(assuming the air conditioner is used solely for work during those hours)

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Cleaning Expenses

If there is a dedicated home office:

• calculate total cleaning costs

• apportion based on floor area

• adjust for private use and use by other household members

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Phone, Data and Internet

• Use a 4-week representative period that reflects the client’s usual working pattern

• determine work-related percentage

• apply to the full income year

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Stationery and Consumables

• Use receipts

• apportion if partly used for private purposes

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Record Keeping (Actual Cost Method)

Clients must keep:

• a record of hours worked

  • either for the full year, or

  • a representative 4-week period

• receipts and bills for all expenses

• evidence showing how the deduction was calculated

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Common Errors to Watch For

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As a tax agent, you should be alert to:

• claiming both methods in the same year

• double claiming expenses (e.g. claiming internet separately when using the fixed rate)

• estimating hours instead of keeping records

• incorrectly claiming occupancy expenses without meeting strict criteria

• failing to apportion private use

These are common ATO review risk areas.

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Key Takeaways for Tax Agents

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• Determine the appropriate method before calculating

• Confirm the correct rate for the relevant income year (67c vs 70c)

• Ensure clients understand record-keeping requirements upfront

• Watch for double claims and incorrect assumptions

• The fixed rate method is simpler—but may result in a lower deduction

• The actual cost method is more complex—but may produce a better outcome