Working From Home Tax Deductions in Australia: The Complete Guide

From 1 July 2022, the ATO revised its WFH deduction methods. There are now two options - the revised fixed rate method and the actual cost method. The shortcut method (80c/hr, available 2020–2022) no longer applies.

• Revised Fixed Rate Method: 67 cents per hour for every hour worked from home - this single rate covers electricity, gas, internet, mobile and home phone (the data and voice component), and stationery and computer consumables
• Actual Cost Method: claim the actual work-related proportion of every individual expense - electricity, internet, phone, depreciation of assets, office furniture, and cleaning costs of a dedicated work area
• The 67c/hr rate does NOT include: decline in value (depreciation) of home office equipment and furniture, repairs to home office equipment, or the cost of a separate dedicated internet connection - these are claimed separately under both methods
• The old 52c/hr method (pre-July 2022) is no longer available - do not attempt to use it for 2022–23 onwards; the only methods now are 67c/hr or actual cost
• The shortcut method of 80c/hr that covered all expenses (available only from 1 March 2020 to 30 June 2022) is also no longer available - COVID-era concessions have ended
• Choosing between methods: the 67c/hr method is simpler (one figure × hours) while the actual cost method is more complex but can yield a larger deduction if your actual expenses are high (e.g. you have a high electricity bill, expensive internet plan or significant assets)
• You can change methods between financial years - choose whichever produces the larger deduction each year, provided you have the records to support the method chosen

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Record-keeping is the most common reason WFH deduction claims are disallowed by the ATO. The requirements differ significantly between the two methods.

• Fixed rate method (67c/hr) record-keeping: you must keep a record of total hours worked from home for the ENTIRE income year - a diary, timesheet, roster or log that covers all 12 months; a representative 4-week diary extrapolated over the year was allowed previously but the ATO now requires a full-year record from 2022–23
• The ATO specifically states you cannot estimate WFH hours under the revised fixed rate method - contemporaneous records for the full year are required; reconstruct if needed using calendar FREE entries, emails, or employer records
• Additionally for 67c/hr: you must keep records showing you actually incurred each expense that the rate covers (e.g. internet and phone bills, electricity bills) - the rate replaces the need to calculate the exact work proportion, but you must show you have internet, phone and electricity costs
• Actual cost method record-keeping: receipts and invoices for every expense claimed; a diary or log showing the work-use percentage for each item; evidence of the asset's cost and effective life for depreciation calculations
• Phone and internet under actual cost: keep itemised bills for at least one representative 4-week period and calculate the percentage of work versus personal use - apply that percentage to the full year's cost; for example, if 40% of data usage is work-related, claim 40% of the annual plan cost
• Electricity under actual cost: calculate the cost of running your home office equipment using energy consumption (watts × hours × $/kWh) and the proportion of the home used as a workspace; keep electricity bills
• ATO audit risk: WFH deductions are flagged as a focus area in PAYG taxpayer audits - records must be able to withstand scrutiny; claims that appear disproportionate to income or occupation attract attention

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Computers, monitors, desks, chairs and other equipment used for work can be depreciated as a deduction regardless of which method you use for running expenses. This is often the largest single WFH deduction.

• If you purchase a computer, laptop or monitor primarily for work, you can claim decline in value (depreciation) - under the ATO's general depreciation rules or the instant asset write-off for eligible taxpayers
• Instant asset write-off: for employees, this means items costing under $300 can be written off in full immediately - items costing $300 or more must be depreciated over their effective life
• Items over $300: depreciate using the diminishing value or prime cost method over the effective life - the ATO specifies effective lives for common items: laptops 2 years, desktop computers 4 years, printers 5 years, office chairs 10 years, desks 10 years
• Work-use percentage: if a laptop is used 70% for work and 30% personal, you can only claim 70% of the depreciation - estimate the percentage based on actual use pattern and apply consistently
• The $300 immediate deduction does NOT apply if the item cost more than $300 - it is a threshold, not a per-item rule; a $450 monitor must be depreciated regardless of being under a different threshold
• Repairs and maintenance to home office equipment: deductible in full (at work-use percentage) in the year the repair is incurred; improvements that extend the life of equipment are depreciated, not immediately deducted
• Keep purchase receipts, invoices and bank statements for all assets claimed - the ATO can ask for evidence of both the purchase and the work-use percentage during an audit

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One of the most important WFH tax considerations is the potential impact on your home's CGT main residence exemption. This is a significant risk that most employees should actively avoid.

• Occupancy expenses are costs that relate to owning or renting the home itself - mortgage interest, rent, council rates, home insurance and land tax; these are ONLY deductible if a portion of your home is exclusively and regularly used for income-producing activities
• For employees working from home, occupancy expenses are almost never deductible - the ATO's view is that a home office used by an employee (who also has a workplace at their employer's premises) is a matter of convenience, not necessity, and does not support an occupancy deduction
• The CGT main residence exemption applies to 100% of the gain on your primary residence - but if you claim occupancy expenses (mortgage interest, rent) for a home office, you may lose part of this exemption proportionate to the area and period of business use
• Practical guidance: employees should NEVER claim occupancy expenses for a WFH deduction - the tax saving from the deduction is negligible compared to the potential CGT cost on a future home sale
• Running expenses (electricity, phone, internet) under the 67c/hr or actual cost method do NOT trigger the CGT main residence exemption issue - only occupancy expenses (rent, mortgage interest) do
• Sole traders and genuine home-based businesses (with a dedicated, exclusive business area) may legitimately claim occupancy expenses - but must factor in the partial CGT main residence exemption loss when the property is sold; calculate this before deciding to claim
• If you rent and use a portion of your rental property exclusively for business, you may claim the corresponding portion of rent - but the same CGT issue does not apply (rented property has no CGT main residence exemption to lose); keep evidence of the exclusive-use dedicated area

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Understanding what you can and cannot claim - with worked examples - helps you maximise your legitimate deduction without attracting ATO scrutiny.

• Example - 67c/hr method: you worked from home 3 days/week × 8hrs × 48 weeks = 1,152 hours; deduction = 1,152 × $0.67 = $771.84; separately claim depreciation on a $1,500 laptop at 70% work-use = $1,050 in year 1 (under 2-year effective life); total deduction ~$1,822 - no need to calculate actual electricity or internet costs
• Example - actual cost method: electricity $2,400/yr × 15% home office area × 70% work hours proportion = $252; internet $1,200/yr × 50% work use = $600; phone $1,080/yr × 40% work use = $432; depreciation $525; total ~$1,809 - in this case 67c/hr is slightly better and simpler
• Common mistake 1: claiming a 'home office' that is a dining table or shared living area - the ATO allows WFH claims from shared spaces, but occupancy expense claims require a dedicated exclusive-use area; running expense claims (67c/hr) can be made from any regular work location in the home
• Common mistake 2: claiming 67c/hr for internet and phone separately - the 67c/hr rate ALREADY includes the data and voice component of internet and phone; you cannot claim them again separately under this method
• Common mistake 3: estimating hours worked from home without records - a ballpark figure is insufficient; keep a contemporaneous log or diary throughout the year
• Common mistake 4: claiming 100% of expenses when the item has personal use - always apply the work-use percentage honestly; overclaiming is the most common trigger for ATO adjustment letters
• Speak to your accountant in April–May each year to calculate both methods and choose the higher legitimate deduction - the difference can be hundreds of dollars annually

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