Working from home is now a permanent feature of how many Australians work — and the ATO has updated its rules to reflect that. But home office deductions remain one of the most misunderstood areas of tax, with many people either claiming too little or claiming things they're not entitled to.
Here's what you need to know for your next tax return.
"The ATO's revised fixed rate method covers more expenses than before — but it also requires more record-keeping. You need to track your actual hours, not just estimate them."
The Two Methods
There are two ways to claim home office expenses: the revised fixed rate method and the actual cost method. You can only use one per income year, and the right choice depends on your circumstances.
Revised Fixed Rate Method — 67 Cents Per Hour
The ATO's revised fixed rate is 67 cents per hour worked from home. This covers electricity and gas, internet, phone, stationery, and computer consumables. It does not cover depreciation on equipment or furniture — those can still be claimed separately.
The key requirement: you must keep a record of the actual hours you worked from home throughout the year. A representative diary record is no longer accepted — you need documented hours for the full year. Estimates are not enough.
Actual Cost Method
The actual cost method lets you claim the work-related portion of every relevant expense — electricity, gas, internet, phone, depreciation on furniture and equipment, cleaning, and more. You calculate the work-related portion based on either time (hours worked from home vs. total hours the home is used) and floor area (dedicated workspace vs. total home area).
This method generally produces a larger deduction, but it requires more detailed records. You'll need to keep bills, receipts, and a method for calculating the work-use percentage of each expense.
What You Can't Claim
- Mortgage interest or rent (unless you run a genuine home-based business with a dedicated space)
- General household items — coffee, toilet paper, grocery deliveries
- Internet or phone costs that are personal in nature
- A home office you don't actually use for work (a lounge room doesn't count)
Key Takeaways
- Two methods: fixed rate (67c/hr) or actual cost — choose one per year
- Fixed rate now covers phone and internet — no separate claim needed
- Record actual hours worked from home throughout the year
- Actual cost method requires detailed records but can produce a larger deduction
- Mortgage interest and rent are generally not claimable for employees
Home office claims are an area the ATO scrutinises closely, particularly since the pandemic years saw a large increase in claims. If you're unsure whether your records are sufficient or which method gives you the best outcome, we can walk through it with you.