If you work from home, you may be entitled to claim some of the extra costs associated with doing your job. But the method you choose can affect your deduction and the records you need.
The Australian Taxation Office provides two main methods for calculating eligible working-from-home running expenses: the fixed-rate method and the actual cost method.
Both methods require evidence. Neither allows you to claim ordinary household costs simply because you work from home.
Understanding the differences can help you choose an appropriate method and prepare your tax return with greater confidence.
Who can claim working-from-home expenses?
To claim a deduction, you generally need to perform substantive employment duties from home, incur additional running expenses because of that work, and maintain supporting records.
Occasionally checking emails or answering a work call at home does not automatically satisfy the requirements.
You must also have incurred the expense yourself. Costs paid or reimbursed by your employer generally cannot be claimed again.
These principles apply to employees working from home. Sole traders operating a home-based business may have additional considerations, particularly where part of their home is a place of business.
What is the fixed-rate method?
The fixed-rate method allows eligible taxpayers to claim a set amount for each hour worked from home.
The ATO's published rate from 1 July 2024 is 70 cents per hour.
The rate covers eligible additional running expenses for electricity, gas, internet, phone usage, stationery and computer consumables.
You do not need a dedicated home office to use this method. You can work at a kitchen table or another suitable area of your home.
You must still keep a record of your actual working-from-home hours and evidence that you incurred the relevant expenses.
Working from home two days each week
You work eight hours a day from home for two days each week across 46 weeks.
Assuming your records confirm those hours, the calculation is:
2 × 8 × 46 = 736 hours
736 × $0.70 = $515.20
Your fixed-rate deduction would be $515.20, subject to the relevant eligibility and record requirements.
Which expenses are included in the fixed rate?
Electricity and gas
Additional energy used for heating, cooling, lighting and work equipment.
Phone and internet
Eligible home and mobile phone usage, internet and data expenses.
Stationery
Work-related paper, pens and similar stationery expenses.
Computer consumables
Items such as printer ink and other eligible consumable supplies.
You cannot use the fixed rate and then separately claim those same categories of expenses again.
For example, if you claim the fixed rate, you cannot also claim a separate work-related mobile phone usage deduction for the same income year.
What can you claim separately under the fixed-rate method?
Some working-from-home expenses are not included in the hourly rate.
You may be able to claim eligible amounts for:
- Decline in value of computers, laptops, monitors and other depreciating equipment.
- Decline in value of office furniture, including desks and chairs.
- Repairs and maintenance of eligible work equipment.
- Cleaning of a dedicated home office, where deductible.
These separate claims require their own records and must reflect work-related rather than private use.
For employees, eligible depreciating assets costing $300 or less may qualify for an immediate deduction. More expensive items generally require a decline-in-value calculation, subject to the applicable rules.
What is the actual cost method?
The actual cost method calculates the additional expenses you incur as a result of working from home.
Rather than applying one hourly rate, you calculate eligible work-related amounts for each expense.
This can include electricity, internet, phone expenses, stationery, equipment and other allowable costs.
You must be able to demonstrate how you calculated the work-related portion of each expense.
For costs shared between work and private activities, a reasonable apportionment is required.
How do you calculate electricity expenses?
For the actual cost method, the ATO provides guidance on calculating additional electricity and gas usage.
A calculation may consider the cost per unit of energy, the energy used by equipment and the hours it operates for work.
Heating, cooling and lighting calculations also need to reflect the circumstances of the work area.
You cannot simply claim a percentage of the entire household electricity bill without a reasonable basis for that percentage.
How do you calculate internet expenses?
Under the actual cost method, you need to establish a reasonable work-use percentage of your internet costs.
This may involve reviewing the number of people using the connection, work and private activity, and relevant usage records.
The appropriate calculation depends on how the service is used.
Fixed rate vs actual cost: Which is better?
| Feature | Fixed-rate method | Actual cost method |
|---|---|---|
| Calculation | Eligible hours × 70 cents | Actual additional deductible expenses |
| Dedicated office required? | No | No, but circumstances affect eligible costs |
| Hours record | Actual hours throughout the year | Evidence supporting hours and expense calculations |
| Energy expenses | Included in rate | Calculated separately |
| Phone and internet | Included in rate | Eligible work-related portion |
| Equipment depreciation | May be claimed separately | May be claimed separately |
| Record requirements | Hours and evidence of covered expenses | Records of actual costs and apportionment |
Neither method is automatically better for every taxpayer.
The fixed-rate method may involve fewer calculations, while the actual cost method may produce a different deduction where substantial additional expenses can be substantiated.
How much difference can the method make?
Two methods, different outcomes
Assume you have records showing 1,000 eligible working-from-home hours.
Using the fixed-rate method:
1,000 × $0.70 = $700
Now assume your properly calculated additional running expenses covered by the rate would total $920 using the actual cost method.
The actual cost method would produce a $220 higher running-expense deduction in this example.
Eligible equipment depreciation may be added under either method, using the same work-related assumptions.
The figures are illustrative. Actual claims depend on expenses incurred and the records available.
How do you choose the right method?
Establish that you performed substantive work from home and incurred additional expenses.
Check your hours, bills, receipts and evidence of work-related use.
Compare the eligible fixed-rate deduction with substantiated actual additional expenses.
Choose an eligible method, exclude duplicate claims and retain your evidence.
What records do you need for the fixed-rate method?
The ATO requires a record of the actual hours you work from home throughout the income year.
Suitable records can include timesheets, rosters, diaries, spreadsheets or other contemporaneous records showing the hours worked.
An estimate based only on your usual weekly working pattern is not sufficient.
You must also retain evidence that you incurred expenses covered by the rate.
For example, if you incur electricity and internet expenses, retain at least one relevant bill or invoice for each expense category incurred.
Separate deductions for equipment and other allowable costs require additional substantiation.
What records do you need for the actual cost method?
The actual cost method requires more detailed evidence of expenses and their work-related use.
Depending on the claim, records may include:
- Electricity and gas bills.
- Equipment power ratings and usage calculations.
- Internet and mobile phone bills.
- Records supporting work-use percentages.
- Work diaries or timesheets.
- Equipment purchase receipts.
- Depreciation calculations.
- Repair and maintenance invoices.
- Cleaning records for a dedicated home office.
- Evidence of employer reimbursements.
Can you claim rent or mortgage interest?
For most employees working from home, rent, mortgage interest, council rates and home insurance are private occupancy expenses.
Simply working remotely does not make these costs deductible.
In limited circumstances, occupancy expenses may be deductible where part of the home has the character of a place of business.
The rules can be particularly relevant to sole traders operating home-based businesses.
Claiming certain occupancy expenses may also affect the main residence capital gains tax exemption when you eventually sell your home.
Consider those consequences before claiming a proportion of rent, mortgage interest or other occupancy costs.
Common working-from-home deduction mistakes
Estimating hours
Using a standard weekly schedule without records of actual hours.
Claiming expenses twice
Claiming phone or internet costs separately after using the fixed rate.
Claiming employer-paid costs
Deducting equipment or expenses supplied or reimbursed by an employer.
Ignoring private use
Claiming the full cost of equipment also used for personal activities.
Claiming household items
Including coffee, groceries, furniture for private use or family expenses.
Using outdated rates
Applying an old working-from-home rate without checking the relevant income year.
Can you claim working-from-home expenses if you are self-employed?
Sole traders may claim eligible home-based business expenses where the costs relate to earning business income.
The ATO recognises different approaches to calculating home-based business running expenses, including fixed-rate and actual cost methods.
Where an area of your home is a genuine place of business, additional occupancy expense considerations may arise.
The way you use the premises, the nature of your business and the evidence supporting your claim are important.
A sole trader should also consider potential CGT implications before claiming occupancy expenses relating to their home.
Frequently asked questions
What is the working-from-home fixed rate?
The ATO's published fixed rate from 1 July 2024 is 70 cents per eligible hour worked from home. Check the rate applicable to the income year you are claiming.
Do I need a dedicated home office?
No. A dedicated home office is not required for the fixed-rate method. You must still satisfy eligibility and record requirements.
Can I claim internet separately using the fixed rate?
No. Internet and phone usage expenses are included in the fixed rate. You cannot claim them again separately for that income year.
Can I claim a desk or office chair?
Eligible work-related furniture costs may qualify for a deduction or decline-in-value claim, subject to the applicable rules. Private use must be excluded.
Can I claim expenses if I work from home one day a week?
Yes, potentially. The number of days alone does not determine eligibility. You must perform substantive work duties, incur additional expenses and keep records.
Can I use a four-week diary for the fixed-rate method?
No. The fixed-rate method requires a record of actual working-from-home hours throughout the income year. A four-week representative diary alone is insufficient.
Which method gives the bigger tax deduction?
It depends on your actual expenses, work hours and supporting records. Compare both eligible calculations before deciding which method to use.
Check your records before lodging
Working from home does not automatically entitle you to a deduction.
You need to demonstrate that you incurred additional expenses and calculated the work-related amount using an appropriate method.
If you have detailed expense records, comparing both methods may help identify the claim supported by your circumstances.
Keep your hours and expense records throughout the year rather than trying to reconstruct them at tax time.
Not sure which working-from-home method to use?
Your RJS accountant can help you review your eligible expenses, compare the fixed-rate and actual cost methods, and identify the records needed to support your tax return.
Speak to an RJS AccountantSources and further reading
Australian Taxation Office: Working From Home Expenses
Australian Taxation Office: PCG 2023/1, Claiming Additional Running Expenses
Australian Taxation Office: Depreciating Assets Used for Work
Australian Taxation Office: Employees Guide for Work Expenses
Information reviewed October 2026.
This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional adviser.
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