With many people now working from home in some capacity, the good news is you may be able to claim some of your additional running costs as a tax deduction.

The Australian Taxation Office (ATO) has updated advice on the rules for employees who are working from home and businesses who operate some or all of their business from home. 

Here’s a summary of what you may be able to claim and ways to calculate your working from home deductions at tax time.

Which Remote Working Expenses Might Be Claimable?

An illustration divided into six squares, with each containing a line drawing of an item that can be claimed at tax time when working from home, including a lightbulb, stationery, tools and a phone.

There are two methods you can choose from to calculate your working from home expenses, as long as you have the right records. Make sure you use the method that applies to your circumstances and gives you the best outcome. 

When considering each claim, the big question the ATO asks is “How much of this expense is work related?” You may need to apportion expenses based on your work and personal use, depending on the method you use to calculate your deduction.

You may incur additional running expenses when working from home for:

But remember, you can’t claim personal expenses, like coffee, or expenses for your children, such as a computer for their schooling. You also can’t claim items your employer provides or where they reimburse you for the expense, like a laptop or phone.

The Golden Rules of Tax Deductions for Working From Home Expenses

Before claiming a deduction for a work-related expense, remember:

  • You can only claim expenses you’ve paid for – not items provided by your employer or where you’ve been reimbursed for the cost.
  • It must be work-related – directly related to earning your income. If the expense is for a mix of work and private use, you can only claim the work-related use.
  • You’ll need records to prove your tax deductions.

SEE ALSO: 10 Tax Deductions You Could Be Claiming

How to Calculate Your Tax Deductions

Illustration divided into six squares, with simple line drawings of a calendar, clock depicting 9am, briefcase, coffee cup, hamburger and clock depicting 5.30pm.

There are two options for calculating working from home expenses, depending on your circumstances.

Fixed-rate method

As of the 2022-23 financial year, you no longer need to have a dedicated work area, such as a home office, to claim a flat rate per work hour for running costs. This rate, which covers internet and phone usage, electricity and gas, stationery and computer consumables, will save you having to calculate your work-related portion of these expenses.

You can then separately calculate and claim the following expenses that aren’t included in the fixed rate:

  • work-related portion of decline in value of assets, such as computers and office furniture
  • repairs and maintenance of these assets
  • cleaning costs, but only if you have a dedicated home office 

To use the fixed rate method, you are required to keep a record of all the hours you work from home, using a diary, timesheet, roster or similar document. You’ll also need evidence of the expenses covered by the rate that you incurred – such as a phone or electricity bill.  

You'll need receipts for each item you claim separately, plus decline-in-value calculations where appropriate. The free myDeductions tool in the ATO app is a great way to keep a record of all your working from home expenses and this handy depreciation and capital allowances tool can help you easily calculate your deduction. 

Note: if an item costs more than $300, you claim the decline in value of the item, not the whole amount (see below), and you must apportion work and personal use. 

Actual cost method

If you're disciplined about keeping records, you could calculate the work-related portion for most or all working from home expenses. The ATO has a home office expenses calculator and a depreciation and capital allowances tool to help you add it all up. Again, speak with a registered tax professional about what you can and can't claim. Just make sure the agent is registered with the Tax Practitioners Board.

To help you compare the methods, the ATO has guidance on their website, working from home expenses.

SEE ALSO: Tax Return Tips to Get the Most Out of Your Return in 2024

Calculating Expenses That Cost More Than $300

If an item costs $300 or less you can claim an immediate deduction for the cost in the year you buy it if you only use it for work purposes. When an item costs more than $300, you can’t claim the full amount immediately. You will need to calculate the item’s decline in value. This is also known as depreciation.

For these items, like computers, you claim the deduction over a number of years, which takes into account the life of the asset and the number of days during the year that you owned and used it for work purposes.

Equipment costs can be complex to calculate so ask a registered tax professional to help or use the calculators on the ATO website.

HOT TIP: Financial educator Natasha Janssens recommends making logging hours part of your regular routine. “Get in the habit of keeping a diary or log of the hours you work from home (and don’t forget time spent doing work-related study),” she says. “Do the maths before you decide which method is best to use [as] it may be worth the extra effort.”

‍Tax Deductions for Home-Based Businesses

If you are running some or all of your business from home, you may be able to claim the business portion of:

  • running expenses – for example, the usage costs of electricity, gas, phone, internet, cleaning and the decline in value of business assets
  • occupancy expenses – for example, rent, mortgage interest, council rates and insurance.

The types of expenses you can claim depend on how you operate your business out of your home. For example, you can only claim occupancy expenses if the area of your home set aside for your business has the character of a ‘place of business’.

Your business structure also affects what you may be entitled to and your obligations, so make sure you have a look at the ATO’s website.

Find out more about claiming a tax deduction for home-based business expenses – you can find the ATO’s home-based business expenses fact sheet there, too.  

See a Tax Professional

This information is general and only summarises basic tax deductions relating to working from home. It does not take into account your individual circumstances. The ATO provides some calculators that may help you, but tax is a complex subject so see a registered tax agent for individual advice or read more information on the ATO website.

What to Try

This is general information only. Seek professional financial and/or legal advice to determine the right outcomes for your business or individual needs.

This article was originally published in 2020 and has been updated.

SEE ALSO: How to Declutter Your Home Office