Work from Home Tax Deductions: What You Need to Know

With remote work becoming the new normal, many Australians are entitled to claim tax deductions for expenses incurred while working from home. The Australian Taxation Office (ATO) allows individuals to claim work-related costs, but understanding what’s deductible and how to claim it correctly can be tricky. This guide explains everything you need to know about work-from-home deductions, helping you maximise your tax return while staying compliant.

1. What Can You Claim as a Work-from-Home Deduction?

If you work from home, you may be able to claim deductions for:

  • Electricity and Gas: The cost of heating, cooling, and lighting your home office.
  • Internet and Phone Bills: A portion of your internet and phone usage related to work.
  • Office Equipment and Furniture: Computers, printers, desks, chairs, and other necessary office items.
  • Depreciation of Office Assets: If you buy expensive equipment, you may claim its depreciation over time.
  • Cleaning Costs: If you have a dedicated work area, you can claim part of your cleaning expenses.
  • Stationery and Office Supplies: Paper, pens, printer ink, and other essential supplies.

However, you cannot claim rent or mortgage repayments, food, or personal items, as these are considered private expenses.

2. How Do You Claim Work from Home Expenses?

There are two methods to claim your work-from-home deductions:

1. Fixed Rate Method (Shortcut Method Replaced in 2023)

The ATO’s new fixed rate method (from 1 July 2022) allows you to claim 67 cents per hour for work-from-home expenses. This rate covers electricity, gas, internet, phone, and stationery costs.

  • Requirements:
    • A record of actual hours worked from home (timesheets, rosters, diary entries).
    • Evidence of expenses incurred (bills, receipts).

2. Actual Cost Method

The actual cost method allows you to calculate and claim the exact amount of expenses related to working from home. This requires more detailed record-keeping but may provide a larger deduction.

  • Requirements:
    • Detailed records of bills and receipts.
    • Calculations showing work-related usage percentage (e.g., internet and phone bills split between work and personal use).
    • Depreciation calculations for office furniture and equipment.

3. What Records Do You Need to Keep?

To successfully claim work-from-home deductions, you must keep:

  • Work hours log (spreadsheet, diary, or timesheet showing actual hours worked from home).
  • Receipts and bills for internet, phone, electricity, office furniture, and supplies.
  • Depreciation schedules for assets costing more than $300.
  • Supporting documents showing the percentage of work use vs. personal use for shared expenses.

4. Common Mistakes to Avoid

  • Claiming Without Records: The ATO requires evidence—without proper records, your claim may be rejected.
  • Overclaiming Personal Expenses: You can only claim work-related portions of phone, internet, and energy bills.
  • Claiming Rent or Mortgage: The ATO does not allow deductions for rent, mortgage, or rates unless you operate a business from home.
  • Ignoring Depreciation Rules: Items over $300 must be depreciated instead of claimed as a one-off expense.

5. Work from Home Deduction Example

  • Example: Emma works from home 3 days per week. She logs 600 hours of home-based work for the year. Using the fixed rate method:
    • 600 hours × 67 cents = $402 deduction.
    • She also buys a $1,200 desk and chair set, depreciating them over 5 years, allowing a further deduction of $240 per year.
  • Example: Alex prefers the actual cost method. He calculates his home office electricity costs at $500 per year and internet at $900, with 50% work-related usage:
    • Electricity claim: $500 × 50% = $250
    • Internet claim: $900 × 50% = $450
    • Total deduction: $700

6. Get the Most from Your Tax Return

To maximise your tax return:

  • Choose the best deduction method based on your expenses and record-keeping ability.
  • Keep clear records of all work-from-home-related costs.
  • Consult a tax agent if you’re unsure which method is best for you.

7. Take Action: Claim Your Work from Home Deductions!

If you’ve been working from home, make sure you claim every eligible deduction. Whether you use the fixed rate or actual cost method, keeping good records is key to maximising your tax return. Don’t miss out—get your receipts in order and consult a tax professional to ensure you’re getting the deductions you deserve!

The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.