Working from home is now normal but claiming deductions remains complicated. This practical guide explains the home office rate, what you can claim, and how to stay compliant with ATO rules.

Key Takeaways:

• The ATO home office rate simplifies claims for common running expenses.
• The revised fixed rate method (67c per hour) includes electricity, phone, internet and stationery.
• The actual cost method may produce bigger deductions but requires more records.
• You must keep a diary, timesheet or roster for hours worked.
• You generally cannot claim rent or mortgage interest unless you run a business from home.
• Always check current ATO guidance, thresholds and rules can change.

What is the home office rate in Australia?

The ‘home office rate’ refers to the standardised methods the Australian Taxation Office (ATO) provides for claiming tax deductions on the extra running costs incurred from working at home. Instead of calculating the exact work-related portion of every utility bill, you can use a set rate for each hour you work from home to simplify the process.

With remote work a permanent fixture for many Australians, understanding these rules is crucial. According to Roy Morgan, around 37% of the workforce regularly worked from home in 2024, showing a lasting shift in employment habits.

The ATO offers two main ways to claim these expenses, each with different record-keeping requirements:

1. Revised Fixed Rate Method: The most common option, often called the ‘ATO 67 cents rule’. It’s a simple, all-inclusive rate per hour that covers most common running expenses.
2. Actual Cost Method: This requires calculating the specific work-related percentage of each individual expense. It demands detailed records but can result in a larger deduction if your costs are high.

For a deeper dive into what you can claim, see our guide on how to claim work from home expenses in 2025.

ATO’s revised fixed rate method

The revised fixed rate method is the ATO’s solution for simplifying working-from-home claims. As of the 2024-2025 financial year, the rate is 67 cents for every hour worked from home. This method streamlines the calculation for the ATO home office rate 2025 by bundling several common expenses into one figure.

Think of it as a package deal. For every hour you work from home, you can claim a set amount, covering your main home office running expenses without needing to apportion every single bill.

To be eligible, you must:

• Be working from home to fulfil your employment duties.
• Incur additional running expenses as a result of working from home.
• Keep records to prove the hours you worked and the expenses you incurred.

What the 67c home office rate covers

The main advantage of the fixed rate method for home office use is its simplicity. The 67 cents per hour rate is a shortcut that covers the work-related portion of:

• Energy expenses (electricity and gas) for lighting, heating, cooling, and running electronic items.
• Home and mobile phone usage.
• Internet expenses.
• Stationery and computer consumables (e.g., printer ink and paper).

This means you don’t have to calculate the work-related percentage of your power, phone, or internet bills. You just need a record of your hours and proof you incurred these costs.

What You Must Claim Separately

It’s critical to know what the rate doesn’t cover, as this is where people miss deductions. You can still make separate claims for the depreciation for home office items. This includes the decline in value of assets like:

• Computers and laptops
• Monitors and printers
• Office furniture (desks, chairs)

Key Takeaway: The fixed rate method covers running costs, but you must claim depreciation on equipment and furniture separately. This is a common point of confusion that can reduce your tax refund if overlooked.

For detailed rules on assets, refer to the official ATO guidance on depreciation.

Actual cost method: when and why to use it

The actual cost method is the alternative to the fixed rate. It involves calculating the specific work-related percentage of every individual home office expense. This method requires much more detailed record-keeping but could lead to a bigger deduction, especially if your running costs are high or you have a dedicated home office space.

The choice between actual cost vs fixed rate depends on your circumstances and willingness to maintain records. You might choose the actual cost method if:

• Your electricity usage for work is significantly high (e.g., you use multiple large monitors or specialised equipment).
• You have a dedicated home office that occupies a large percentage of your home’s floor area, increasing your claimable portion of utility bills.
• You are diligent with record-keeping and can provide substantiation for every claimed expense.

Fixed rate vs actual cost

To help you decide, here is a direct comparison of the two methods.

Attribute	Revised Fixed Rate Method (67c/hr)	Actual Cost Method
Simplicity	High. Simple calculation based on hours worked.	Low. Requires detailed calculations for each expense.
Record-Keeping	Moderate. Requires a log of hours worked and one proof of payment for each expense type (e.g., one electricity bill, one phone bill).	High. Requires receipts for every expense and a detailed basis for apportionment (e.g., floor area calculations, 4-week logbook for phone/internet).
Expenses Covered	Bundles electricity, gas, phone, internet, stationery, and consumables.	Covers all actual running expenses, including cleaning and repairs of the home office area.
Depreciation	Claimed separately for assets like computers and furniture.	Calculated and included as part of the total claim.
Best For	Individuals seeking simplicity with standard running costs.	Those with high running costs, a dedicated office space, and excellent record-keeping habits.

How to claim home office rates correctly

Here is a practical process for calculating your working from home tax deductions, regardless of the method you choose.

1. Choose Your Method: Decide between the revised fixed rate and actual cost method based on the table above. You cannot use both methods in the same financial year.
2. Gather Your Records: This is the most crucial step for ATO compliance.
   • Fixed Rate: Collate your work-from-home logbook, timesheets, or diary showing total hours worked. Find at least one bill for electricity/gas, phone/internet, and stationery to prove you incurred the costs.
   • Actual Cost: Gather every receipt for running costs and asset purchases. Document your work-use percentage calculation (e.g., floor area diagram, 4-week diary of phone/internet usage).
3. Calculate Your Deduction:
   • Fixed Rate: Multiply your total work-from-home hours by 0.67. Then, separately calculate and add the depreciation on your office assets.
   • Actual Cost: For each expense, calculate the work-related portion and add them all together. Include the calculated depreciation on assets in your total.
4. Lodge Your Tax Return: Enter the total amount at the ‘Work-related expenses’ section of your tax return (e.g., via myTax). Be sure to specify which method you used.
5. Keep Records for 5 Years: The ATO can request to see your records for up to five years after you lodge your return.

Worked example: Comparing fixed rate vs actual cost for 10 hours/week

Let’s imagine an employee, Alex, who works 10 hours per week from home for 48 weeks of the year.

• Total hours worked: 10 hours/week x 48 weeks = 480 hours

Fixed Rate Method Calculation:

• Deduction for running costs: 480 hours x $0.67 = $321.60
• Alex also bought a new ergonomic chair for $500. He calculates the depreciation for the year as $100.
• Total Fixed Rate Claim: $321.60 + $100 = $421.60

Actual Cost Method Calculation:

• Alex’s dedicated home office is 10% of his home’s total floor area.
• Annual electricity bill: $2,000 -> Work portion (10%) = $200
• Annual internet bill: $960 -> Work portion (30% based on a logbook) = $288
• Stationery costs: $50
• Depreciation on the chair: $100
• Total Actual Cost Claim: $200 + $288 + $50 + $100 = $638.00

In this example, the actual cost method yields a higher deduction, but it required Alex to keep more detailed records and calculations.

Special rules for small businesses and sole traders

For those running a business from home, the rules for small business home office deductions are more generous than for employees. A sole trader home office rate can include a broader range of expenses.

The key difference lies in claiming occupancy expenses vs running expenses. While employees are limited to running costs (the cost of using the home), a home-based business may be able to claim occupancy expenses (the costs of owning or renting the home).

These can include a portion of:

• Mortgage interest or rent
• Council rates and land tax
• Home and contents insurance

You can only claim these home-based business deductions if your home is your principal place of business, meaning you have a dedicated area used exclusively for business activities. Simply using the kitchen table for administrative tasks is generally not sufficient. Our guide to small business tax deductions has more detail.

Occupancy expenses: When are they allowed?

Claiming occupancy expenses is a significant step with major implications. To be eligible, the ATO generally requires that your home office has the “character of a place of business.” This could be a doctor’s surgery, a hairdresser’s studio, or a tradesperson’s workshop located at your home.

The Capital Gains Tax (CGT) Warning

Claiming occupancy expenses comes with a critical trade-off. When you sell your home, the portion you claimed as a business expense will generally not be covered by the main residence exemption from Capital Gains Tax (CGT).

Important: This means you may have to pay CGT on part of your home’s sale profit. Always seek professional advice to weigh the immediate tax benefit against the future CGT liability.

What records you must keep

Your claim is only as good as your proof. For solid record-keeping ATO home office claims, ensure you have the following:

•  A record of hours worked: A timesheet, roster, or diary showing the total hours worked from home for the entire financial year (e.g., 1 July to 30 June).
•  Proof of expenses (Fixed Rate Method): At least one receipt or bill for each category of expense covered by the rate (energy, phone, internet, stationery) to show you incurred the costs.
•  All receipts (Actual Cost Method): Every itemised bill and receipt for all running costs claimed.
•  Depreciation records: For any asset over $300, keep receipts and a schedule showing how you calculated its decline in value.
•  Apportioning calculations: A document explaining your method for calculating the work-use percentage (e.g., floor area measurements, a 4-week representative work-from-home logbook for phone/internet usage).

Common mistakes and quick fixes

• Mistake: Double-dipping. Claiming a separate deduction for an internet bill after using the all-inclusive fixed rate.
  • Fix: Remember the ATO 67 cents rule is a package deal. Only claim depreciation on assets separately.
• Mistake: Guesstimating hours. Relying on memory instead of keeping a contemporaneous logbook.
  • Fix: Use a simple spreadsheet or diary to log your start and finish times each day. Consistency is key.
• Mistake: Forgetting about assets. Not claiming depreciation on items like a new monitor or desk.
  • Fix: Keep all receipts for office equipment over $300 and use the ATO’s depreciation tools to calculate your claim.
• Mistake: Claiming rent as an employee. Misunderstanding the rules around occupancy expenses.
  • Fix: Unless you are running a qualifying home-based business, you cannot claim rent or mortgage interest.

FAQs

Can I claim rent for my home office in Australia?

For employees, the answer is almost always no. Rent is an occupancy expense, which is not deductible for employees working from home. However, if you are running a qualifying business from a dedicated area in your home, you may be able to claim a portion of your rent.

What if my employer reimburses me for home office costs?

You cannot claim a tax deduction for any expense that your employer has reimbursed you for. A deduction is only for money you have spent out of your own pocket that has not been paid back.

Does the home office rate cover the purchase of a new desk or computer?

No, the 67 cents per hour fixed rate only covers running expenses like electricity, internet, and stationery. The purchase of assets like desks, chairs, or computers must be claimed separately through depreciation (decline in value) over the item’s effective life.

What is the easiest way to track my hours worked from home?

The easiest way is to keep a simple, consistent log. This can be a digital spreadsheet, a diary, or using your employer’s timesheet or roster system. The key is to record your hours as you go, rather than trying to estimate them at the end of the financial year.

Can I claim cleaning costs for my home office?

If you use the actual cost method and have a dedicated home office area, you can claim the work-related portion of your cleaning expenses. However, cleaning costs are not covered by the 67 cents per hour fixed rate.

Navigating the rules around the home office rate can be complex. Don’t leave money on the table or risk an ATO audit by getting it wrong. The expert team at Nanak Accountants & Associates can provide the clarity and confidence you need to maximise your return.

Book a consult with Nanak Accountants & Associates -1300 NANAK TAX (626 258).

This article provides general information only for Australia. It doesn’t consider your objectives, financial situation or needs. Rules, thresholds and fees change,check current ATO/ASIC/ABR/Fair Work/auDA guidance and seek professional advice before acting.