Claiming Work From Home Tax Deductions

If you’re an employee who works from home, you’re probably using things like your phone, internet, and electricity. These are considered work from home tax deductions that you could potentially claim on your tax return. However, it’s important to note that how you work from home impacts whether you can claim home office expenses.

To claim a home office tax deduction, you must:

• Work from home regularly to fulfil your employment duties,
• Have additional expenses as a result of working from home, and
• Have adequate records that outline the hours worked and/or expenses you incurred.

Occasionally checking emails, taking the occasional work call, or doing minimal work tasks are not usually sufficient, even if they are done from home.

What are home office expenses?

Home office expenses are the extra costs you pay for by working from home rather than at your employer’s workplace. These costs can include electricity, internet, mobile phone, office equipment, computers, and more. On your tax return these are sometimes called work from home tax deductions.

Example:
Alex works from a dedicated home office two days per week. Alex incurs additional costs during these two days that she wouldn’t usually if she worked in the office. These include internet, mobile phone, electricity, and stationery. Since she works from a dedicated home office, Alex can choose to claim either the fixed rate method, or the actual cost method.

How can you claim home office expenses?

There are two methods to claim home office expenses.

A) Fixed Rate Method: Combines most work from home tax deductions into a single hourly rate:

• 2025 tax return onwards = 70 cents per hour worked from home

B) Actual Cost Method: Lets you claim each expense separately, but doesn’t allow you to claim a standard hourly rate.

You can’t combine A and B – it is one or the other. (Etax can help you find which method is more valuable for you.) Let’s cover some details:

A) Fixed Rate method

In March 2023, the ATO introduced a new fixed rate method for work from home deductions. This method is calculated at 70 cents for each hour you work from home and includes the following expenses:

• Electricity and gas
• Home and mobile phone expenses
• Internet
• Computer consumables and stationery

There are still some expenses you can also claim in addition to the fixed rate method on your tax return. These include:

• Full purchase price of office equipment that cost less than $300 (e.g. an office chair, keyboard, mouse).
• Depreciation on office equipment that cost more than $300 (e.g. standing desk, bookshelf). You can also claim the repairs and maintenance of these items.

When using this method, you must keep an accurate record of actual hours worked from home, through:

• Timesheets or rosters
• Employer logs or time-tracking apps
• A regularly updated calendar, logbook, spreadsheet

Remember to always keep your receipts for other items like office equipment, as these are likely items that decline in value over time, and you might even be able to also claim the repairs and maintenance of these items.

You cannot use the fixed rate method if you’re paying board rather than rent or a mortgage. Instead, use the actual cost method for expenses you personally paid for.

Remember: you need to keep your records for 5 years (in most cases) from the date you lodge your tax return.

B) Actual Cost method

The actual cost method is exactly what it says – you claim the actual cost of running your home office (see example below for calculations) rather than the standard 70 cents per hour that is claimed under the fixed rate method. Expenses that you can claim individually through the actual cost method include:

• Electricity and gas
• Phone expenses (home and mobile)
• Internet
• Stationery and computer consumables
• Home office cleaning expenses
• Full purchase price of office equipment that cost less than $300 (e.g. an office chair)
• Depreciation on office equipment that cost more than $300 (e.g. Standing desk)

To claim the actual cost method, you need to keep a record of the expenses you are claiming, as well as the days and hours you work from home.

For more information on the actual cost method, read the actual cost method blog post.

How to calculate work from home tax deductions

If you use Etax, you can skip this part as we’ll work it out for you, but if you’re interested in how these two methods are calculated, we have provided an example comparing the two methods.

Example 1:

Diego is a recruitment consultant who works 24 hours per week from home and keeps a diary of his hours. He has a company laptop and mobile phone but uses his home internet, which he shares with his wife. He calculates that 55% of his internet use is work-related. His share of the $80 monthly internet bill is $40. The work-related portion of his electricity works out to be 15% of the year’s bills.

Fixed Rate method:

• 24 hours per week x $0.70 x 48 weeks (52 weeks minus 4 weeks annual leave) = $806.40
  • (Diego can’t claim his internet, and power expenses using the fixed rate method, as it’s already included in the 70c per hour rate).
• Total claim using this method = $806.40

Actual Cost method:

• Diego can claim an apportioned amount of his electricity and internet bills.
• For internet, Diego claims 55% of $40/month 11 months (one year minus his 1 month annual leave) = $242.00
• For electricity, he claims 15% of the total of 11 months’ worth of electricity bills ($1,356) = $203.40
• Total claim using actual cost method = $445.40

Therefore in this example, Diego’s working from home tax deduction claim would be $361.00 higher using the fixed rate method over the actual cost method.

What home office expenses can’t you claim?

To claim any work from home deduction on your tax return, you must meet the following criteria:

• You must have paid for the item yourself: Items supplied by your employer cannot be included on your return.
• You must be out of pocket for the expense: If you purchased items on a company credit card or they reimbursed you for the purchase, you can’t also claim it on your tax return.
• Have evidence to support your claim: You need receipts for purchases and records of hours worked from home.

How do I know which method is best for claiming work from home expenses?

IIt can be tricky to know which method will give you a better refund. For some people the fixed rate method works best, while others get a bigger work from home deduction using the actual cost method. It depends on your personal circumstances.  

Don’t worry though! If you use Etax, you don’t need to work it out yourself! Simply enter your home office expense information and our tax return will automatically calculate which method is best for you and apply it to your tax return. This ensures you always get the biggest work from home tax deduction claim on your tax return!