Work From Home Tax Deductions 2025: The Complete Guide
Everything you need to know about claiming your home office expenses
In this guide, you will learn: The two methods for claiming work from home expenses, how to calculate your deduction under each method, what records you need to keep, and how to choose the approach that puts more money in your pocket.
Who This Guide is For
This guide is for any Australian employee who works from home, whether that is:
- Full-time remote workers who rarely see the office
- Hybrid workers splitting time between home and office
- Occasional WFH workers who work from home a few days a month
- Self-employed individuals with a home office
If you have worked even a single day from home during the 2024-25 financial year, you may be entitled to claim deductions.
Step 1: Understand the Two Methods
The ATO provides two ways to calculate your work from home deductions: the Fixed Rate Method and the Actual Cost Method.
Fixed Rate Method: Simple and Straightforward
Under this method, you claim 70 cents for every hour you work from home. This single rate covers:
- Electricity and gas for heating, cooling, and lighting
- Phone and internet usage
- Computer consumables (printer ink, stationery)
- Cleaning of your dedicated work area
Key requirement: You must have a dedicated workspace, such as a home office or a specific area set up for work.
Actual Cost Method: Maximum Deductions, More Effort
This method lets you claim the actual work-related portion of your expenses:
- Electricity: The work-related percentage
- Internet: The work-related percentage
- Phone: The work-related percentage
- Office equipment depreciation
- Repairs and maintenance for your home office
Step 2: Calculate Your Hours Worked From Home
Both methods require you to know how many hours you worked from home.
Acceptable Records
- Timesheets: If your employer tracks your hours
- Roster or diary: Personal records of days worked from home
- Calendar entries: Digital calendar showing WFH days
- TaxBot tracking: Automatic hour logging with GPS verification
Fixed Rate Calculation Example
Emma works from home 3 days per week, 48 weeks per year
- Days per week: 3
- Hours per day: 8
- Weeks per year: 48 (accounting for annual leave)
- Total hours: 3 x 8 x 48 = 1,152 hours
- Deduction: 1,152 x $0.70 = $806.40
Step 3: Calculate Actual Costs (If Applicable)
If you are considering the actual cost method:
Electricity Calculation
Emma's electricity calculation:
- Annual electricity bill: $2,400
- Home office as percentage of home: 10%
- Hours used for work vs total hours: 1,152 / 8,760 = 13.2%
- Combined percentage: 10% x 13.2% = 1.32%
- Deductible electricity: $2,400 x 1.32% = $31.68
Depreciation on Equipment
Emma bought a $1,500 laptop used 70% for work:
- Effective life of laptop: 4 years
- Annual depreciation: $1,500 / 4 = $375
- Work portion: $375 x 70% = $262.50
Comparison: Fixed rate gives Emma $806.40, while actual cost gives her $774.18. In this case, the fixed rate method is better and requires far less record-keeping.
Step 4: Understand What You Cannot Claim
The ATO is clear about what does not qualify:
- Rent or mortgage: Not deductible for employees
- General household items: Coffee, snacks, general furniture
- Childcare: Even if needed to work from home
- Personal portion of expenses: Netflix, personal phone calls
- Capital costs of your home: Renovations, improvements
Warning: The ATO uses data matching to identify overclaiming. If your deductions seem unusually high for your occupation or income, expect questions.
Step 5: Keep the Right Records
Fixed Rate Method Records
- A record of hours worked from home (timesheet, diary, or app)
- Evidence you have a dedicated workspace (a photo is helpful)
- That is it. No bills required for the fixed rate component.
Actual Cost Method Records
- All utility bills for the period
- Receipts for equipment purchases
- A diary of work hours
- Floor plan or measurement of home office as percentage of home
- Records of how you calculated work-related percentages
Pro tip: Keep records for 5 years from the date you lodge your return.