Can I claim home office expenses when I work from the kitchen table, a spare room or a desk in the shed? For many Gippsland employees and sole traders, the answer is yes – but only for costs that are genuinely connected to earning income and supported by the right records.
Working from home does not automatically create a deduction. The Australian Taxation Office (ATO) expects you to show that you worked from home, incurred an additional expense, and did not receive reimbursement from your employer or another party. The method you choose matters too. A reasonable claim is one that reflects your real working arrangement, not an estimate made at tax-return time.
Can I claim home office costs as an employee?
Employees can generally claim running expenses associated with working from home. These are the extra costs of using your home to do your job, rather than the normal costs of owning or living in the property.
For example, an administrator completing reports at home, a nurse preparing mandatory online training, or a project manager taking work calls after hours may incur additional electricity, internet, mobile and stationery costs. If those expenses have not been reimbursed, a deduction may be available.
The key word is additional. You cannot claim household costs that would have been the same whether you worked at home or not. Having the heating on while the family is home, for instance, does not mean the full power bill is deductible. Your claim needs to account for your work-related use.
You also cannot claim home office expenses simply because you prefer working at home. There must be a connection between the home-based work and your employment duties. A voluntary arrangement can still qualify in some cases, but the expenses must be incurred while you are actually performing income-producing work.
Running expenses versus occupancy expenses
This distinction prevents a lot of confusion at tax time. Running expenses include items such as electricity and gas used while working, internet and mobile usage, home phone costs, stationery, printer ink and the decline in value of eligible equipment.
Occupancy expenses are different. They include rent, mortgage interest, council rates, land tax and home insurance. Most employees working remotely cannot claim these expenses, even if they have a dedicated study.
Occupancy expenses may be relevant where a person runs a genuine business from home and the home is clearly their principal place of business. This is more common for a sole trader with no other business premises, such as a bookkeeper, consultant or home-based professional. However, claiming occupancy expenses can have capital gains tax consequences when the home is sold. It is an area worth checking carefully before including it in a return.
The two ways to calculate a home office claim
The ATO allows two main approaches for working-from-home running expenses: the fixed-rate method and the actual cost method. Neither is automatically better. The best choice depends on your work hours, the costs you incur and the quality of your records.
The fixed-rate method
For the 2023-24 and 2024-25 income years, the fixed rate is 67 cents for each hour worked from home. This rate covers electricity and gas, internet and data, mobile and home phone usage, and stationery and computer consumables.
You can claim certain costs separately when using this method. These may include the decline in value of work-related assets, such as a computer, desk or office chair, as well as repairs and maintenance for those assets where applicable. You should not claim the same expense twice. For example, internet costs are already included in the 67-cent rate, so they cannot also be claimed separately.
The fixed-rate method is straightforward, but it is not a shortcut around record keeping. You need a record of the total hours you worked from home across the income year. A timesheet, roster, diary, calendar record or similar system may be suitable if it accurately shows your home-working hours. You also need evidence that you paid for the relevant household costs, such as bills or supplier statements.
A professional who works from home two evenings each week and one regular day may find this method practical. The same applies to an employee on a formal hybrid arrangement who has clear timesheets and a consistent work pattern.
The actual cost method
The actual cost method means working out the work-related portion of each individual expense. It can produce a higher deduction where home-working costs are substantial, but it requires more detailed calculations and documents.
For electricity, you may need to consider the energy use of equipment, the hours used and the relevant tariff. For internet and mobile costs, you need a reasonable basis for separating work use from private use. A four-week representative diary can help establish a work-use percentage for some expenses, provided your usage pattern is consistent.
This method can be useful for a sole trader with a clearly defined work area, high equipment use or significant work-related phone and data use. It may also suit a person whose home office is used heavily throughout the year. The trade-off is administration: without sound records, an actual-cost calculation can be difficult to support.
What records should you keep?
Good records do more than protect a deduction if the ATO asks questions. They make your tax return faster to prepare and reduce the risk of overlooking legitimate expenses.
Keep your bills, invoices and receipts, along with evidence of payment where possible. Retain records showing the hours you worked from home, as well as purchase records for assets such as monitors, laptops, desks and ergonomic chairs. If you use an item for both work and private purposes, record a reasonable work-related percentage.
For assets costing more than the relevant immediate deduction threshold, you may need to claim the decline in value over time rather than deducting the full cost in one year. A laptop used 70 per cent for work, for example, is not automatically 100 per cent deductible just because it sits in the home office.
Records should generally be kept for five years after lodging your tax return. Save digital copies in an organised folder during the year rather than relying on a search through old emails and bank transactions in June.
Common home office mistakes to avoid
The most common mistake is claiming an amount without a calculation or supporting documents. A rough estimate of “a few days each week” is not enough for a fixed-rate claim if you cannot show the hours worked.
Another frequent issue is double claiming. If you use the fixed rate, do not separately add internet, phone, electricity, stationery or computer consumables already covered by that rate. Similarly, if your employer reimbursed a cost, you generally cannot claim it yourself.
Be cautious with furniture and equipment purchased partly for private use. A desk may be used exclusively for work, while a family computer often is not. The deduction should reflect the work-related share. It is also wise to distinguish between a repair to an existing asset and an improvement, as the tax treatment may differ.
Sole traders should take extra care before claiming rent, mortgage interest or other occupancy expenses. A claim may be available in the right circumstances, but it should be based on a genuine business use of the home and considered alongside potential capital gains tax implications.
A practical way to stay organised
Set up a simple monthly routine. Record home-working hours, save household bills and file receipts for work equipment as they arise. If your hours vary due to site visits, shifts or seasonal workloads, update your record at the time rather than trying to reconstruct it later.
For business owners, clear home office records also support more accurate financial statements and help separate personal spending from business costs. This matters for cash-flow reporting, BAS preparation and understanding what the business is actually costing to run.
A home office deduction should be worthwhile, accurate and easy to explain. If your circumstances include a dedicated business space, mixed private and work use, reimbursements, or a potential occupancy claim, getting tailored advice before lodging can provide confidence that your claim is both fair and fully compliant.