Working from home is now a permanent fixture for a huge number of workers across Melbourne's western suburbs — whether you're a Tarneit-based project manager doing three days a week from the study, or a Hoppers Crossing sole trader running your whole business from the kitchen bench.
The tax deduction is still there. What has changed, and keeps changing, is the evidence the ATO expects you to hold. This is one of the most commonly adjusted deductions at review, and it's almost never because the taxpayer wasn't genuinely working from home — it's because the records didn't stack up.
Your two options: fixed rate or actual cost
There is no longer a "shortcut" COVID-era method. You have two choices, and you can use whichever gives you the better outcome — provided you meet the conditions for it.
1. The fixed rate method
Under the ATO's revised fixed rate method (PCG 2023/1), you claim a set rate for each hour you work from home. The rate was 67 cents per hour when the revised method was introduced, and the ATO increased it to 70 cents per hour from 1 July 2024. Please confirm the current-year rate on the ATO website before lodging, as it is reviewed periodically.
The rate is designed to cover the running costs that are genuinely difficult to apportion:
- Electricity and gas for heating, cooling and lighting
- Home and mobile internet
- Home and mobile phone usage
- Stationery and computer consumables
The critical trap: you cannot claim any of those items separately on top of the fixed rate. If you claim 70c per hour and then also claim your $89 a month internet bill, you have double-dipped. This is exactly the kind of mismatch the ATO's data matching picks up.
What you can still claim separately under the fixed rate method:
- Decline in value (depreciation) of assets used for work — laptops, monitors, office chairs, desks
- Repairs and maintenance to those assets
- Cleaning of a dedicated home office (if you have one)
2. The actual cost method
Here you work out the real, additional expense you incurred as a result of working from home, and apportion it for private use. That means keeping bills, calculating the cost of running specific appliances, and being able to demonstrate your work-related percentage.
It is more work, but it frequently produces a bigger deduction — particularly if you have a genuinely dedicated home office, high energy costs, or you're running a business from home rather than doing occasional employee work.
The record that catches everyone out
Under the revised fixed rate method, an estimate is no longer acceptable. You need a record of the total number of actual hours you worked from home across the whole income year.
"I worked from home two days a week, so that's about 800 hours" is not a record. A timesheet, roster, diary, spreadsheet or logbook kept as you go is a record. It doesn't need to be sophisticated — a simple spreadsheet with the date and hours worked is fine — but it needs to be contemporaneous and it needs to cover the full year.
You also need at least one bill for each running cost covered by the rate (an electricity bill, a phone bill, an internet bill) to demonstrate you actually incurred those expenses. You don't need every bill for the year — but you need evidence you were liable for the cost.
You must actually be working — not just checking email
To claim at all, you need to be carrying out your employment duties or running your business from home. The ATO is clear that minimal tasks don't count — occasionally answering emails or taking a phone call at home in the evening is not "working from home" for deduction purposes.
You also need to be incurring additional running costs. If you live with others and someone else pays the entire electricity bill, your position is weaker.
What you can never claim as an employee
Regardless of which method you use, employees generally cannot claim occupancy expenses:
- Rent
- Mortgage interest
- Council rates
- Home and contents insurance
Coffee, tea, milk and other general household items are also out — the ATO's position is that these are private expenses you'd incur anyway.
A warning for home-based business owners
If you run a business from home and you have an area set aside exclusively as a place of business, you may be able to claim a portion of occupancy costs. That sounds attractive — but it can affect your main residence CGT exemption when you eventually sell the property.
This is a genuinely significant issue. A modest annual deduction can turn into a real capital gains tax bill years down the track. If you're a Werribee or Point Cook business owner with a dedicated business space at home, talk to us before you start claiming occupancy costs — the numbers need to be modelled over the long term, not just for one tax year.
A quick worked example
Priya works from her Altona home three days a week. Her diary shows 1,150 hours worked from home for the year.
- Fixed rate claim: 1,150 × $0.70 = $805
- Plus depreciation on her $2,000 laptop, apportioned for the 80% work use she has substantiated
- Plus depreciation on her $600 desk chair, used solely for work
She cannot also claim her internet or mobile phone, because those are already built into the 70c rate. If her actual costs would clearly exceed this, the actual cost method is worth running as a comparison — which is exactly the calculation we do at appointment time.
Get your records sorted now, not in July
The single best thing you can do is start a simple hours log today. Reconstructing a year of working-from-home hours in October, from memory, is where most claims fall apart under scrutiny.
If you're unsure which method suits your situation, or you're a home-based business owner weighing up occupancy costs, the team at ProPartners Accountants & Advisers in Werribee can work through it with you. We look after individuals and small businesses across Altona, Williamstown, Hoppers Crossing, Sunshine, Tarneit and the wider western suburbs — get in touch to book a time.