Working from home has become part of everyday life for millions of Australians. The good news is that the ATO allows you to claim a deduction for expenses you incur when working from home — but the rules changed in 2023 and many people are still claiming incorrectly.
This guide covers everything you need to know about work from home deductions for FY2024–25, including which method to use, what records to keep, and what you absolutely cannot claim.
Who Can Claim Work From Home Deductions?
You can claim WFH deductions if you are an employee who:
- Works from home while carrying out employment duties (not just checking emails)
- Incurs additional expenses as a result of working from home
- Has a record of the hours you worked from home
Simply checking work emails at home or occasionally taking a call doesn't qualify. You need to be carrying out substantive employment duties from home on a regular basis.
The Two Methods for Claiming WFH Deductions
For FY2024–25, there are two methods for claiming work from home deductions. You can choose whichever gives you the higher deduction — but you must be eligible and meet the record-keeping requirements for the method you choose.
| Method | Rate | What it covers | Records needed |
|---|---|---|---|
| Fixed rate method | 67c per hour | Energy, internet, phone, stationery, computer consumables | Total hours worked from home (diary or timesheets) |
| Actual cost method | Actual expenses | All work-related home office expenses (calculated separately) | Receipts, floor area %, invoices for every expense |
Fixed Rate Method — 67 Cents Per Hour
The fixed rate method is the simpler of the two options and is used by most employees. For FY2024–25, the rate is 67 cents per hour worked from home.
This rate covers:
- Energy expenses (electricity and gas) for heating, cooling and lighting
- The work-related portion of your home internet
- The work-related portion of your phone
- Stationery and computer consumables
Depreciating assets such as your desk, chair, monitor, keyboard, or laptop are not covered by the 67c rate and can be claimed separately. Items over $300 must be depreciated over their effective life. Items under $300 can be claimed immediately.
How to Calculate Your Fixed Rate Deduction
The formula is simple: Total hours worked from home × 67 cents
For example, if you worked from home for 40 hours per week for 46 weeks of the year:
- 40 hours × 46 weeks = 1,840 hours
- 1,840 × $0.67 = $1,232.80 deduction
Record Keeping for the Fixed Rate Method
You must keep a record of the total number of hours you worked from home. The ATO accepts:
- A diary or similar document recording actual hours (not estimated)
- Timesheets or rosters
- A representative four-week record for the full year (if your pattern is consistent)
From 1 July 2022, the old shortcut method of 80c per hour was permanently abolished. You can no longer use this method. The current fixed rate is 67c per hour.
Actual Cost Method
The actual cost method lets you claim the actual work-related portion of your home office expenses. This can result in a higher deduction but requires significantly more record keeping.
Under this method, you can claim:
- The work-related proportion of your home energy bills
- The work-related proportion of your home internet
- The work-related proportion of your phone
- Depreciating assets (desk, chair, computer equipment)
- Cleaning costs for your dedicated home office
- Occupancy expenses only if you are a sole trader (employees cannot claim rent or mortgage interest)
Calculating Your Home Office Floor Area
For energy and occupancy expenses, you calculate the work-related portion by dividing the floor area of your home office by the total floor area of your home.
For example: a 10m² study in a 100m² house = 10% of energy and occupancy costs are work-related.
What Records Do You Need to Keep?
Record keeping is where most people fall down. The ATO requires contemporaneous records — not reconstructed after the fact.
For the fixed rate method:
- A record of total hours worked from home (diary, calendar, spreadsheet)
- Evidence of additional expenses you incur — at least one document for each type (e.g. one electricity bill showing you pay for your home energy)
For the actual cost method:
- All receipts and invoices for home office expenses
- Floor area calculations and home plans if available
- A four-week representative diary showing work pattern
- Evidence of work-related use percentage for shared items
Create a folder in Google Drive or Dropbox labelled "Tax 2024-25" and photograph every receipt. Store your work-from-home diary there too. If the ATO ever asks, everything is in one place.
What You Cannot Claim as an Employee
These are the most common mistakes the ATO sees:
- Rent or mortgage interest — employees cannot claim occupancy costs, only sole traders can
- Coffee and snacks — food consumed at home is not deductible regardless of whether you're working
- General home maintenance — cleaning the whole house, lawn mowing, repairs to other areas
- Items used for private purposes — if your child uses your work computer, you can only claim the work-related portion
- Items your employer reimburses — you cannot claim expenses that your employer has paid or reimbursed
Sole Traders and the Home Office
If you run a business from home as a sole trader, the rules are more generous. Unlike employees, sole traders can claim occupancy expenses for a dedicated home office, including:
- Rent — the proportion attributable to your home office
- Mortgage interest — the proportion attributable to your home office
- Council rates, insurance and repairs for the home office area
If you claim occupancy expenses as a sole trader, you may trigger a partial capital gains tax liability when you sell your home, as part of the main residence exemption may be lost. Speak with a tax agent before claiming these expenses.
Worked Examples
Example 1 — Employee using fixed rate method
Sarah is a marketing manager who works from home 3 days per week. She worked 48 weeks during the year.
- Hours per week: 24 hours × 48 weeks = 1,152 hours
- Fixed rate deduction: 1,152 × $0.67 = $771.84
- Plus: new laptop purchased for $1,400 — she can claim depreciation over 3 years = $467/yr
- Total WFH deduction: $1,238.84
Example 2 — Sole trader claiming occupancy
James runs a consulting business from a dedicated study in his home. Study is 12m² in a 150m² home = 8% of home used for business.
- Annual mortgage interest: $28,000 × 8% = $2,240
- Council rates: $2,000 × 8% = $160
- Home insurance: $1,500 × 8% = $120
- Electricity: $3,600 × 8% = $288
- Total occupancy deduction: $2,808
Digitwise Consulting reviews your work from home deductions and ensures you claim everything you're entitled to — without the audit risk. Fixed price, Melbourne-based.
Disclaimer: This article is for general information only and does not constitute tax advice. Individual circumstances vary. Consult a registered tax agent for advice specific to your situation. ATO rules and rates may change — always verify current rates at ato.gov.au.