Working from home can make tax deductions feel deceptively simple. You may have a laptop on the dining table, a dedicated study at the end of the hall, or a business run almost entirely from a spare room. In each case, the deduction is not based on how often you work at home alone. It depends on what you paid, how the cost relates to earning your income, whether you were reimbursed, and the records you kept.
For employees, working from home generally creates deductions for additional running costs. For sole traders, the position can extend further where the home is genuinely used as a place of business. The important part is choosing the right calculation method and avoiding duplicate claims.
Start with the basic rule: work-related, paid by you and properly recorded
A deduction is not available simply because an item is useful for work or because you worked from home. The expense needs a real connection with producing your assessable income or carrying on your business. Private, domestic and capital costs are treated differently, and a mixed expense needs to be divided on a fair and reasonable basis.
There are three practical questions to ask before adding a home-office cost to your tax return:
- Did you personally incur the cost?
- Were you reimbursed by your employer or someone else?
- Can you show how you calculated the work or business portion?
If your employer supplied the equipment, paid the bill or reimbursed you, you generally cannot claim that same expense. An allowance can be different: where an allowance is included in your income, a deduction may still be available for eligible expenses you actually incurred.
For employees, the substantiation rules can require written evidence. For both employees and sole traders, keeping invoices, bills, receipts, work diaries, timesheets and reasonable calculations throughout the year is far easier than reconstructing a claim at tax time.
The first three deductions are often bundled into your working-from-home method
The ATO recognises two broad approaches for working-from-home running expenses: the fixed rate method and the actual cost method. The better option depends on your circumstances, but you need to apply it consistently and avoid claiming the same cost twice.
1. Electricity and gas used while you work
Heating, cooling, lighting and the electricity used to run work equipment may create an additional running cost when you work from home. If you use the actual cost method, you need a reasonable basis for identifying the work-related additional cost, supported by records. This may involve energy bills, records of your work hours and evidence about the relevant equipment’s use.
The fixed rate method is often simpler because it covers energy expenses as part of an hourly amount. The ATO’s published rate is 70 cents per hour from 1 July 2024. It is a method for calculating eligible running expenses, not an automatic deduction for every hour spent at home. You still need to be performing work duties and to have incurred relevant expenses.
A common mistake is to claim a percentage of the whole household electricity bill merely because there is a study in the house. The deduction must reflect the additional work-related cost, not the ordinary cost of living at home.
2. Home internet, mobile and phone costs
Your internet and phone expenses can be easy to overlook, particularly if one household plan covers work, streaming, family devices and personal use. The work-related component may be deductible where you paid for it and can reasonably support the business or employment use.
If you use the fixed rate method, home and mobile internet, data and phone usage are already included in the hourly rate. You cannot claim them again separately merely because the bill is large. However, if you use the actual cost method, you may claim the work-related portion where you have adequate evidence and an appropriate basis for apportionment.
For example, a sole trader who takes client calls, attends video meetings and accesses cloud accounting software through a home internet service may have a stronger work-use pattern than someone who only checks emails occasionally. The calculation still needs to separate private use from business use.
3. Stationery and computer consumables
Printer paper, ink, pens, postage, work-related stationery and computer consumables are often small purchases that add up over a year. These costs may be deductible to the extent they are used for employment duties or in carrying on a business.
Again, the method matters. The fixed rate method already includes stationery and computer consumables. If you use that method, do not also list printer ink and paper as separate working-from-home deductions. Under the actual cost method, separate claims may be possible where the work-related use is documented.
It is also worth distinguishing work consumables from general household spending. Tea, coffee, milk and other ordinary household items do not become deductible because you consumed them while working at home.
Equipment, furniture and repairs can sit outside the hourly rate
The fixed rate is not intended to cover every home-office cost. One of the most frequently missed areas is the decline in value of work-related equipment and furniture, together with eligible repairs and maintenance.
4. Decline in value of your work equipment and furniture
A computer, monitor, desk, chair, printer, headset, software or other work asset may decline in value over time. Where you own the item and use it to earn employment income or run your business, you may be entitled to claim the work-related portion of that decline in value.
This is particularly relevant for people using the fixed rate method. The fixed rate covers running costs such as energy, internet, phone usage, stationery and computer consumables, but it does not cover the decline in value of depreciating assets. That means an eligible separate claim may still be available for your laptop, office chair or other work equipment.
Private use needs to be taken into account. A laptop shared with family members, used for entertainment or used for study requires a sensible apportionment. Keep the purchase record, note when the asset started being used for work, and retain a record of how you determined the work-use percentage.
5. Repairs and maintenance of work assets
Repairs and maintenance can be overlooked after the original equipment purchase has been dealt with. Eligible costs may include repairs to a work computer, printer or other depreciating asset used in your job or business, to the extent the item is used for income-producing activities.
This is not the same as buying a replacement or making an improvement. The tax treatment can differ where expenditure creates or upgrades an asset rather than simply restoring it. If the distinction is unclear, it is sensible to obtain advice before lodging your return.
A dedicated workspace may support cleaning expenses
6. Cleaning a separate home office
Cleaning costs can be missed by people who maintain a dedicated study, consultation room or workshop at home. The key point is that the expense needs to relate to a separate work area, rather than general cleaning of the home.
For employees, a cleaning claim is generally limited to the actual cost of cleaning a room set aside as a home office. For home-based businesses, cleaning may also form part of the running costs associated with using a dedicated business area.
A dedicated space is more persuasive where it is clearly used for work and not simply a multi-purpose room that happens to contain a desk. Keep cleaning invoices where you engage a cleaner, or retain clear records if you use another supportable method to work out an eligible business expense.
Occupancy costs are possible, but they need particular care
7. Rent, mortgage interest, rates and insurance in limited cases
Occupancy expenses are costs of owning or renting a home, such as rent, mortgage interest, council rates, water rates, land tax and house insurance. These are not ordinary working-from-home deductions simply because you spend several days each week answering emails from home.
For a sole trader, a claim may be possible where part of the home has the character of a place of business. Relevant indicators include whether the area is clearly identifiable as a business area, is not readily suitable for private use, is used exclusively or almost exclusively for the business, and is regularly used for client or customer visits.
For an employee, the circumstances are narrower. A claim for occupancy expenses generally requires more than an employer-approved hybrid arrangement. The nature of the income-producing activities must require a place of business, there must be no alternative place provided by the employer, and the area must be used exclusively or almost exclusively for work and not readily capable of another use.
Occupancy claims require caution because using a home as a place of business can affect the capital gains tax treatment when the property is sold. The ATO notes that capital gains tax may apply to the relevant part of a home where an area is specifically set aside for business activities and occupancy expenses are claimed.
Consider a graphic designer operating as a sole trader. They work from a desk in the living room most days, but the area is also used by the household in the evenings. They may be able to claim relevant running costs, equipment and internet use. However, that shared space may not have the character of a place of business needed for an occupancy-cost claim. A separate studio used only for client work could lead to a different outcome, along with different capital gains tax considerations.
Keep a work-from-home diary before EOFY
The best deduction is not always the largest-looking calculation. It is the claim that matches your circumstances and can be supported if the ATO asks questions.
If you use the fixed rate method, retain a record of the actual hours worked from home across the income year, such as timesheets, rosters or a diary. You also need evidence that you incurred the types of expenses covered by the rate. A four-week diary alone is not sufficient evidence of the total hours for that method.
If you use the actual cost method, retain evidence for each expense and records supporting your work-use calculation. A representative record of your work pattern may help support the calculation, but it needs to reflect your real circumstances.
The key takeaway is simple: working from home can create legitimate deductions, but the right claim depends on your method, your records and whether you are an employee or genuinely operating a business from home. Before lodging, review the seven areas above and make sure you have not duplicated expenses already included in a fixed-rate claim.
This article is general information only and is not personal financial or tax advice. Tax outcomes depend on your circumstances, records and business structure. Speak with a registered tax agent or accountant, such as, for advice tailored to your situation.