Working From Home Deductions: How the Fixed Rate Method Works

Working from home is now a normal part of many jobs, and the extra costs you pay for electricity, internet and your phone can add up. If you work from home to do your job, you may be able to claim a deduction for those costs in your tax return. The Australian Taxation Office (ATO) gives you two ways to work it out: the fixed rate method and the actual cost method.

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Who can claim

You can claim working from home expenses if all of the following apply:

• You work from home to fulfil your employment duties, not just minimal tasks such as occasionally checking emails or taking a phone call.
• You pay extra running expenses because you work from home, such as higher electricity or internet costs.
• Your employer does not reimburse you for those costs.
• You keep the records the ATO requires (see below).

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The fixed rate method: 70 cents per hour

From 1 July 2024, the fixed rate is 70 cents for every hour you work from home (it was 67 cents for the 2022–23 and 2023–24 years). For example, if you work from home 2 days a week, 7.5 hours a day, for 46 weeks of the year, that is 690 hours, or a deduction of about $483.

The rate covers:

• Energy expenses, such as electricity and gas for heating, cooling and lighting
• Internet
• Mobile and home phone usage
• Stationery and computer consumables, such as printer ink and paper

Because these costs are included in the rate, you cannot claim them separately as well.

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What you can claim on top of the fixed rate

Some costs are not included in the 70 cents and can be claimed separately:

• Equipment and furniture you use for work, such as a laptop, monitor, desk or office chair. Items costing $300 or less can generally be claimed in full straight away; items over $300 are depreciated over their effective life.
• Repairs and maintenance of that equipment and furniture.
• Only the work-related portion can be claimed if you also use these items privately.

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The records you need to keep

This is where many claims fall down. To use the fixed rate method you must keep:

• A record of the actual hours you worked from home for the whole year, such as timesheets, rosters, or a diary kept as you go. An estimate or a four-week sample is not accepted.
• One document for each type of expense covered by the rate, such as one electricity bill and one phone bill, showing you paid that kind of cost.
• Receipts for any equipment or furniture you claim separately.

Keep these records for five years from the date you lodge your tax return.

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The actual cost method

Instead of the fixed rate, you can claim the actual extra costs you pay because you work from home. This can give a larger deduction, for example if you use a lot of power for equipment, but the record keeping is much heavier. You need receipts or bills for every expense and a reasonable way to work out the work-use portion, such as an electricity usage diary for a representative four-week period.

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What employees usually cannot claim

Most employees cannot claim occupancy expenses, such as rent, mortgage interest, council rates or home insurance, even if they have a dedicated study. These are generally only deductible when your home is your place of business. Claiming them can also affect the main residence exemption from capital gains tax when you sell, so get advice first.

Other costs you cannot claim include coffee, tea and snacks, costs your employer pays for or reimburses, and expenses for your children’s education, such as their laptops.

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Final thoughts

For most people the fixed rate method is the simplest choice, as long as you keep an accurate record of the hours you work from home. Start a simple log at the beginning of the financial year, keep one bill for each expense type, and keep receipts for any work equipment you buy. If you are not sure which method gives you the better result, our team can work it out for you when we prepare your tax return. For other work-related expenses, see our guide to what you can and can’t claim.

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