Working from home is now normal for a large share of Perth workers, and so is confusion about what it means at tax time. The rules have been rewritten more than once in recent years, the record-keeping expectations have tightened considerably, and a lot of people are still claiming the way they did during the pandemic. Here is how the deduction works now.
What can you actually claim?
The deduction covers the additional running costs you incur because you work from home. That means electricity and gas for heating, cooling and lighting the area you work in, internet and phone usage, stationery and computer consumables, and the decline in value of office furniture and equipment such as a desk, chair, monitor or laptop. What it does not cover is anything you would have paid regardless — rent, mortgage interest, council rates, home insurance — or personal items like coffee, snacks and general household goods. The test is whether the cost went up because work moved into your house.
How does the fixed rate method work?
The fixed rate method gives you a set cents-per-hour amount for every hour you work from home, and that single figure covers electricity, gas, internet, home and mobile phone, stationery and computer consumables. Its appeal is simplicity: multiply your hours by the rate and you are done. The trade-off is that you cannot then claim any of those covered items separately — no additional phone or internet claim on top. You can still claim depreciation on furniture and equipment, and repairs to those items, as separate deductions, because the rate does not include them.
When is the actual cost method better?
The actual cost method means working out the real work-related portion of each expense and claiming that. It usually produces a bigger deduction for people with a dedicated home office, high energy use, or expensive equipment — and a much smaller one for someone working from the kitchen table two days a week. The catch is the evidence burden: you need receipts or bills for everything, plus a defensible basis for the percentage you have applied, such as floor area for energy costs or a representative usage record for internet and phone. If your claim is significant, it is worth calculating both methods and using whichever is higher, which you are entitled to do.
What records does the ATO expect?
This is where most claims fall over. Under the fixed rate method you must keep a record of the total hours actually worked from home across the entire income year — a timesheet, roster, diary or app log kept as you go. An estimate, or a four-week sample scaled up to twelve months, is no longer accepted. You also need at least one bill for each of the running costs the rate covers, to show you incurred them. Under the actual cost method you need documentation for every expense claimed and for the apportionment. Building the habit of logging hours weekly takes minutes and is the difference between a claim that stands up and one that gets adjusted; the same principle applies to all your record-keeping obligations.
Can you claim rent, mortgage interest or rates?
Almost always no, and it is worth understanding why. Occupancy expenses are only deductible where part of your home is a genuine place of business — a hairdresser with a fitted salon room, a practitioner with a signed consulting space that clients attend. An employee with a laptop in the spare bedroom does not meet that test, even if they work from home full time. There is also a sting in the tail: claiming occupancy expenses can forfeit part of your main residence exemption, so a portion of the capital gain becomes taxable when you sell. That is usually a far larger number than the deduction you gained.
What about equipment you bought yourself?
Equipment used for work is claimed based on its work-related percentage. Items costing $300 or less that are used predominantly for work can generally be claimed immediately; above that threshold you claim the decline in value over the asset's effective life. If you bought a $1,800 laptop used 70% for work, you are claiming 70% of the depreciation each year, not 70% of the purchase price up front. Keep the invoice and a note of how you arrived at the percentage. Business owners operating through a company or trust are in a different position again, with the instant asset write-off rules potentially applying instead.
What trips people up most often?
Three things. Claiming the fixed rate and then also claiming phone and internet, which is a straightforward double-dip the ATO's data matching finds easily. Claiming hours that do not reconcile with an employment pattern — full-time-equivalent home hours from someone rostered in an office three days a week. And claiming the full cost of an asset used partly for private purposes. None of these are aggressive tax positions; they are usually honest mistakes, but they still result in an amended assessment and, where the shortfall is large, a penalty.
Working from home deductions are modest individually and meaningful over a career, provided the records exist to support them. The Metier Group prepares individual returns for Perth clients through our personal tax services, including sorting out which method leaves you better off. Contact us if you would like your claim reviewed before it is lodged.