What You Can Claim as a Work-From-Home Deduction in 2025
According to the Australian Taxation Office (ATO), you may be eligible to claim home office expenses if you meet specific criteria. The key requirements are straightforward but must be strictly followed to ensure compliance.
Eligibility Requirements
You can claim home office deductions if you satisfy all of the following conditions:
- Work from home to fulfill employment duties – Simply checking emails or making occasional calls doesn't qualify
- Incur additional running expenses – You must have extra costs directly related to working from home
- Maintain proper records – Documentation must clearly show these work-related costs
Eligible Expenses You Can Claim
The ATO allows you to claim a wide range of home office expenses, provided they are directly related to your work activities:
Running Expenses
- Electricity and gas for heating, cooling, and lighting your workspace
- Internet and phone costs (work-related portion only)
- Stationery and consumables such as printer ink, pens, and paper
- Cleaning expenses (if you have a dedicated workspace)
Equipment and Furniture
- Decline in value (depreciation) of office equipment like computers, desks, and chairs
- Repairs and maintenance to home office assets
- Office furniture used primarily for work purposes
What You Cannot Claim
It's equally important to understand what expenses are not deductible to avoid issues with the ATO:
- Mortgage interest or rent (unless you're running a home-based business)
- General household items like coffee, tea, or milk
- Costs already reimbursed by your employer
- Expenses not directly related to work
- Capital improvements to your home
Calculation Methods: Fixed Rate vs Actual Cost
The ATO provides two methods for calculating your home office deductions. Choose the method that best suits your situation and provides the most accurate reflection of your expenses.
1. Fixed-Rate Method
For the 2024–25 financial year, the ATO fixed rate has increased to 70¢ per work hour (up from 67¢ in previous years).
What the Fixed Rate Covers:
- Energy costs (electricity and gas)
- Internet and phone expenses
- Stationery and consumables
- Depreciation of furniture and fittings
- Cleaning expenses
Additional Claims Allowed:
You can separately claim items not covered by the fixed rate, such as:
- Computer equipment and software
- Mobile phones and tablets
- Professional development materials
Record-Keeping Requirements:
Important: You must maintain a detailed timesheet, diary, or roster showing actual hours worked. The ATO no longer accepts estimated hours from 4-week snapshots.
Example: If you worked from home for 1,200 hours during the financial year: 1,200 hours × $0.70 = $840 deduction
2. Actual Cost Method
This method allows you to claim the actual work-related portion of each expense using the formula:
Total bills × percentage of hours worked from home × portion of home used for work
Requirements for Actual Cost Method:
- All original receipts for expenses claimed
- Four-week usage diary showing work patterns
- Measurements of workspace relative to your entire home
- Detailed calculations showing how percentages were determined
When to Choose This Method:
The actual cost method can result in higher deductions for those with:
- Substantial home office running costs
- Expensive office equipment
- Dedicated home office spaces
- High energy usage for work purposes
Record Keeping: ATO Compliance Essentials
Proper record-keeping is crucial for claiming home office deductions. The ATO requires you to keep records for at least five years from the date you lodge your tax return.
Essential Documents to Maintain:
- Work diary or log showing hours worked from home
- Bills and receipts for energy, internet, phone, and stationery
- Invoices and receipts for depreciable items (laptops, desks, chairs)
- Calculation worksheets showing how work-related percentages were determined
- Floor plan or measurements of your workspace (for actual cost method)
- Photographs of workspace (optional but helpful for support)
Digital Record Keeping Tips:
- Use smartphone apps to photograph receipts immediately
- Maintain electronic spreadsheets for time tracking
- Store digital copies in cloud storage for backup
- Organize files by financial year for easy access
Common Mistakes to Avoid
The ATO has increased scrutiny on home office deduction claims, with many claims being rejected due to poor documentation or overclaimed usage. Avoid these common pitfalls:
Documentation Errors:
- Claiming entire bills without proper apportionment for work use
- Using estimated hours instead of actual time logs
- Missing receipts or inadequate documentation
- Inconsistent record-keeping throughout the year
Method Confusion:
- Double-claiming expenses – using the fixed rate and separately claiming covered expenses
- Switching methods mid-year without proper justification
- Mixing calculation approaches inappropriately
ATO Red Flags:
- Sudden spikes in claims compared to previous years
- Claims without supporting evidence
- Unrealistic work-from-home hours
- Claiming expenses already reimbursed by employers
Method Comparison
Use this comparison table to determine which method best suits your situation:
| Deduction Method | What It Covers | Best For | Key Requirement |
|---|---|---|---|
| Fixed Rate (70¢/hour) | Energy, internet, phone, stationery, furniture depreciation, cleaning | Simplified claims, moderate hours worked from home | Detailed timesheet log of actual hours |
| Actual Cost Method | All work-related home office expenses at actual cost | High expense users, substantial equipment owners | All receipts, 4-week diary, floor area calculations |
Planning for 2025 and Beyond
As remote work continues to be a significant part of Australia's employment landscape, staying informed about deduction rules and maintaining excellent records will help you maximize legitimate tax benefits.
Best Practices for Success:
- Start record-keeping early – Don't wait until tax time
- Choose one method consistently throughout the financial year
- Regularly review your setup to ensure optimal deduction approach
- Consult with tax professionals for complex situations
- Stay updated on ATO guidance and rate changes
Key Takeaways
Working from home provides legitimate opportunities to reduce your taxable income through proper deduction claims. Whether you choose the simplified fixed-rate method at 70¢ per hour or the more detailed actual cost method, success depends on meeting eligibility requirements and maintaining comprehensive records.
The most important factors for successful home office deduction claims are accuracy, compliance, and documentation. By following ATO guidelines and keeping meticulous records, you can confidently claim the deductions you're entitled to while avoiding potential issues during review.
Remember that tax rules can change, and individual circumstances vary significantly. For complex situations or substantial claims, professional tax advice ensures you're maximizing your deductions while remaining fully compliant with ATO requirements.