Claiming Work-From-Home Expenses – How to Get the Most Bang for Your Buck

Working from home has its perks (hello, comfy track pants and zero commute!), but did you know it can also save you money at tax time?

Many small business owners – from virtual assistants and consultants to creative eCommerce entrepreneurs and boutique retailers – find themselves running their business from a home office.
One of the most common questions we hear is, “How do I claim my work-from-home expenses and get the best bang for my buck on my tax return?”

The good news: the Australian Taxation Office (ATO) gives you two different methods to claim those home office running costs. In plain English, you can choose between a quick fixed-rate shortcut or a more detailed actual-cost approach. Let’s break down both options and help you figure out which one’s right for you.

Method 1: The Fixed Rate (Easy Option)

Think of the fixed rate method as the no-fuss shortcut. Instead of tracking every dollar you spend on power bills or paperclips, you claim a flat rate for each hour you work from home. As of now, that rate is 70 cents per hour (until 1 July 2025) – and it may be updated each financial year, so be sure to check the current rate after 1 July each year.

This single rate wraps up all your basic running expenses into one neat package. It covers things like:

• Electricity and gas
• Internet and phone usage
• Stationery and office supplies

All you need to do is keep a record of your hours worked from home (for example, in a diary or timesheet). Then at tax time, you multiply those hours by the rate (e.g. 70c) to calculate your deduction.

That’s it! No piles of receipts for power bills or splitting hairs over how much of your internet was for work. This method is quick and straightforward, making it great for people who only work from home occasionally or don’t want the hassle of detailed record-keeping.
For instance, if you usually work on-site and only do, say, 1-2 days a week from home, the fixed rate method is probably your friend.

Tip: The fixed rate method is updated regularly (for example, it rose from 67¢ to 70¢ per hour in recent years). If you choose this method, stay alert each year for the ATO’s announced rate so you can get your full entitlement.

“Using the actual cost method means more diligence: you’ll need to save bills, receipts and records throughout the year.”

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Method 2: The Actual Cost (Detailed Option)

The actual cost method is exactly what it sounds like – you claim the actual expenses you incur from running your business at home.

This method takes a bit more work (and paperwork), but it can potentially give you a larger deduction if you’re working from home a lot.

Essentially, you’ll be keeping detailed records of every work-related expense for your home office and claiming the work portion of those costs.

What kind of expenses can you claim with the actual cost method? Here are some examples that many home-based business owners can include:

• Utilities: A portion of your electricity, gas, and water bills, proportional to the area of your home used for work. (For example, if your dedicated home office is 20% of your house’s floor space, you could claim 20% of these bills as business expenses.)
• Internet and phone: The work-related percentage of your internet and phone bills. You’ll need to determine a reasonable split between work and personal use (e.g. if roughly half of your internet usage is for your business, you’d claim 50% of your internet costs).
• Cleaning costs: If you have a dedicated office room at home, you can claim a portion of cleaning expenses for that space. Keeping your workspace spick and span isn’t just hygienic – it’s tax-deductible!
• Office supplies and equipment: All those stationery items, printer paper, and ink count as expenses. If you buy small office equipment or gadgets, note that items under $300 can typically be deducted in full immediately. For larger items over $300 (think office chairs, computers, or other furniture), you can claim the work-use percentage of their cost over time (depreciation). So, if you splurge on a fancy $ 1,000 standing desk that you use 100% for work, you’ll depreciate it; whereas a $250 desk could be claimed outright in the year of purchase.
• Occupancy costs (rent): Do you rent your home? If you have a room set aside for business, you can claim a portion of your rent equal to the percentage of the office space. (Using the earlier example, 20% of your home used for work means you could claim 20% of your rent as a business expense.) Important: If you own your home, it’s generally not recommended to claim a portion of your mortgage or housing costs for a home office – this is a tricky area best left to an accountant’s advice, as it can have other tax implications.

Using the actual cost method means more diligence: you’ll need to save bills, receipts and records throughout the year.

Many full-time home-based business owners find this worthwhile because it often yields a bigger deduction than the flat rate. In fact, at Dollars + Sense, we’ve noticed that almost all our sole trader clients who work from home opt for the actual cost method.

If running your business from home is your main gig, chances are you’re already doing a form of this – keeping receipts for expenses and logging bills – even if you didn’t realise it. The key is to stay on top of that paperwork (or digital records) so you have everything ready for tax time.

Tools to help: We recommend using apps like Dext to snap and store your receipts and Xero to track your expenses. That way, all your documents are organised throughout the year. (Our team uses Dext and Xero to collect and manage clients’ home office expenses – it makes life so much easier when tax season rolls around!)

Which Method Should You Choose?

By now you might be thinking, “Alright, so which method gets me the most money back?” The answer will depend on your situation, work habits, and tolerance for record-keeping. Here are a few pointers to help you decide:

• If you only work from home occasionally or part-time: The fixed rate method is probably the simplest and plenty effective. Say you spend one or two days a week working from your home office (and the rest at a workplace or on the road). A quick log of hours and you’re done – no need to dig up bills for every tiny expense. This method is also handy if you’re juggling a side business on top of a regular PAYG job – it’s a no-fuss way to claim those few hours a week you put into your side hustle at home.

• If you run a full-time business from home: You’ll likely get a better result with the actual cost method. When your home is your primary place of business (for example, you’re a freelancer, consultant, artist, or online store owner working from a home office every day), those running costs can add up to a significant amount. The actual method lets you claim exactly what you’re spending on the business, which often means a larger deduction than the flat rate. Yes, it’s more work to track everything, but the savings can be well worth it. And remember, a bookkeeper can help you set up a system to capture these expenses painlessly (or even do it for you).

• Unsure or in between? If you’re not sure which way to go – maybe you work from home about half the time, or you suspect your claims would be similar either way – it doesn’t hurt to calculate it both ways (or have your bookkeeper or accountant do a comparison). Sometimes we run the numbers for our clients using both methods to see which yields a bigger deduction. Just make sure you only claim one method on your tax return; you can’t mix and match in the same year.

Whichever method you choose, the golden rule is be organised. If you go with the fixed rate, keep a reliable log of your WFH hours. If you go with actual costs, keep those receipts and bills filed (digitally or in a folder) and note the business-use percentage of each expense. Being organised means that come tax time, you won’t be scrambling – and you’ll get the maximum deduction you’re entitled to with minimal stress.