Working from home? A guide for claiming home office expenses that keeps you out of trouble with the ATO…

Has the COVID-19 outbreak forced you and/or your people to isolate and work from home? 

If so, you’re joining a growing band of Australians who are either working from home or running their small business from home. 

What we’ve seen is that many people are doing this with little knowledge of the rules for claiming home office expenses. 

It’s vital to understand what you can claim for and what you can’t or you could end up in hot water with the Australian Taxation Office (ATO)… 

Claiming home office expenses: the three basic conditions 

Working from your home office may incur costs that you are able to deduct in your annual tax return. 

However, the ATO has announced that it will exercise additional scrutiny over home office deductions to identify incorrect claims, which will be disallowed. 



It is important to know what you can claim and what information you need to keep if you are making a claim.

When claiming home office expenses, the following three basic conditions must be met:

1. You must have spent the money

To claim an expense, you must have incurred an expense! 

For example, if you hire a cleaner to maintain your home office, you have incurred an expense and you may be able to claim the cost of those cleaning services. 

If you choose not to hire a cleaner, you cannot claim for the hours that you spent cleaning your home office.

Sometimes, employers will reimburse you for any additional costs incurred when working from home. 

In such cases, the ATO’s view is that you did not spend the money. It was spent by the person who reimbursed you (your employer). 

So, if you spent $50 to hire a cleaner and your employer pays you back for this, you cannot claim it.

2. Money spent must relate to making an income

To claim a home office deduction, the money must have been spent in relation to the income you earn.

You cannot buy a television for personal entertainment, place it in your home office and then claim it because the television does not enable you to earn income.

Additionally, when you incur a cost that is partially for business purposes and partially for personal use, such as your mobile phone bill, you can only claim the business-related portion.

3. You must have a record of the expense

If the ATO audits your tax return, you must provide a record (such as the tax invoice) to prove that you paid for the item. 

Alternatively, you will need to provide a representative four-week diary of the hours that you work from home. 

Small business accountants recommend that you keep your tax records for seven years. 

Claiming home office expenses: the two calculation methods

There are two methods of claiming home office expenses:

1. Fixed rate

You can claim a deduction of 52 cents for each hour you work from home instead of recording all of your actual expenses (heating, cooling, lighting, cleaning, decline in value of furniture, etc.)


This rate is based on the average energy costs and the value of common furniture items used in home business areas. 

To claim using this method, keep either: 


  • Records of your actual hours spent working at home for the year; or
  • A diary for a representative four-week period to show your usual pattern of working at home 


With the latter method, you can apply the four-week representative period across the remainder of the year to determine your full deduction amount. 


However, if your work pattern changes you will need to create a new record. 

You need to separately work out all other home work area expenses, such as: 


  • Phone and internet expenses
  • Computer consumables and stationery
  • Decline in the value of computers or other equipment


The ATO has just announced that individuals can claim a rate of 80 cents for each hour an individual carries out genuine work duties from home during the period 1st March 2020 to 30th June 2020. This rate however covers all deductible running expenses like phone and internet expenses, computer consumables, depreciation and electricity!

2. Actual running expenses

If you work from home, you can claim the work-related proportion of your running expenses.

The proportion is based on the amount of expense used for the business. 

Expenses include: 


  • Home office equipment including computers, printers, telephones and furniture and furnishings. You can claim:
  • The full cost for items up to $300
  • The decline in value for items over $300
  • Heating, cooling, and lighting
  • The costs of repairs to your home office equipment, furniture, and furnishings
  • Cleaning costs
  • Other running expenses, including computer consumables (for example, printer paper and ink) and stationery 



Only the additional running expenses incurred as a result of working from home are deductible. 

If you are only claiming the running expenses, there is no capital gains tax (CGT) consequences on your house. 


Can you claim for your rent or mortgage when working from home? 

Employees are generally not able to claim occupancy expenses such as: 

  • Rent
  • Mortgage interest
  • Property insurance
  • Land taxes
  • Rates 


Businesses can claim occupancy expenses. 


You can only claim for the work-related proportion of occupancy expenses as an employee in two very limited circumstances, when: 

  • The space in your home is a place of business
  • No other work location is provided to you by your employer and you are required to dedicate part of your home to your employer's business as an office. 


If you claim occupancy expenses, you don't qualify for the CGT main residence exemption for the part of your home that you use for work. 


Note that if you use your home as a place of business, there may also be CGT implications when you sell it. 


Need help with understanding home office expenses? 

Claiming home office expenses is not as straightforward as some employers or employees think.

 

The COVID-19 outbreak has placed many businesses and staff members in a position that they didn’t imagine only a month or so ago. 


If you need assistance with unravelling the regulations about claiming home office expenses, speak to one of our advisers here.

Need help with your accounting?

Find Out What We Do

Understanding car fringe benefits.

August 13, 2025
If your business provides a car to an employee (or you’re the business owner/employee using it), there’s a good chance the Fringe Benefits Tax (FBT) rules apply. A car fringe benefit arises when a car owned or leased by an employer is made available for the private use of the business owner, an employee or their associate (such as a family member). “Private use” doesn’t just mean weekend road trips — it can include everyday commuting and even cases where the car is parked at an employee’s home, making it available for personal trips. Understanding how FBT is calculated and what records to keep is essential for compliance — and for avoiding paying more tax than necessary. What counts as a “car” for FBT purposes? The FBT law defines a car as a motor vehicle (except a motorcycle or similar) designed to carry less than one tonne and fewer than nine passengers. From 1 July 2022, some zero or low-emission vehicles are exempt from FBT, provided they meet certain criteria — for example, they must be first held and used after 1 July 2022 and must not have attracted Luxury Car Tax. Electric vehicle running costs, such as charging, are also exempt when the vehicle itself qualifies. Two main methods for calculating FBT on cars There are two ways to calculate the taxable value of a car fringe benefit. 1. Statutory formula method This method applies a flat 20% statutory rate to the base value of the car, adjusted for the number of days in the FBT year the car was available for private use. The formula is: (A × B × C ÷ D) − E A = Base value of the car (cost price plus GST and certain accessories, less registration, stamp duty and eligible reductions) B = Statutory fraction (generally 20%) C = Days available for private use D = Total days in FBT year (365) E = Employee contributions If the car has been owned for at least four full FBT years, the base value can be reduced by one-third. 2. Operating cost method This method calculates the taxable value by applying the private use percentage to the total operating costs of the car (actual and deemed costs). The formula is: Taxable value = [Operating costs × (100% − Business use %)] − Employee contributions Operating costs include: Fuel, oil, repairs, maintenance, registration and insurance Lease costs (for leased cars) Deemed depreciation (25% diminishing value) and deemed interest for owned cars Certain costs, such as tolls, car parking and insurance-funded repairs, are excluded. The business use percentage is determined by odometer readings, logbook records, and a reasonable estimate based on usage patterns. The three-month logbook requirement (operating cost method only). If you use the operating cost method, you must keep a logbook for at least 12 continuous weeks (roughly three months) to record: The date of each trip Odometer readings at the start and end Total kilometres travelled Whether the trip was for business or private purposes The purpose of each business trip This logbook is generally valid for five years, but you must start a new one if usage patterns change significantly (e.g., a role change, relocation or different duties). You also need to record odometer readings at the start and end of each FBT year. Why record-keeping matters. Keeping accurate records can support a higher business use percentage (and therefore a lower FBT bill). They also ensure you claim only legitimate business kilometres and help you provide evidence if the ATO reviews your FBT calculation. Finally, your records help you decide which calculation method (statutory or operating cost) is more tax-effective. Key takeaways for businesses and employees. If a car is available for private use, FBT may apply — even if the car isn’t driven often for personal trips. Electric cars may be FBT-exempt if they meet eligibility criteria, but you may still need to calculate their taxable value for reporting purposes. The operating cost method often works better if business use is high — but only if you have a compliant logbook. Keep odometer readings, expense records and a valid logbook to support your claims. Need help with your FBT obligations? Get it at Ascent Accountants. We guide business owners through every step of FBT compliance — from choosing the right valuation method to maintaining the right records for ATO peace of mind. If you provide cars to employees or use a company vehicle yourself, now is the time to review your FBT position before the next FBT year rolls over. Let’s talk .

EOFY checklist for FIFO workers.

August 13, 2025
Hey FIFO workers. You work hard for your money. Let’s make it work hard for you this EOFY. Tax time it’s your chance to set yourself up for long-term financial security. From deductions and super to loan reviews and goal setting, our FIFO EOFY checklist can help you turn your hard-earned income into lasting wealth.

Understanding R-Codes: Why zoning matters in WA’s property market

August 13, 2025
Zoning can shape your property’s value, development potential and future income. Whether you’re buying, selling or investing in WA, understanding R-Codes is a must. Read the full blog to get the facts.

What does “comfortable retirement” really mean?

July 14, 2025
What does a “comfortable” retirement mean to you? For some, it’s travel and lifestyle. For others, it’s simply having the bills paid on time without stress. Whatever your version of comfortable looks like — the key is planning. We’re here to help!

What is a Clearance Certificate? Why do you need one when selling property?

July 14, 2025
Selling property in Australia? Don’t forget your Clearance Certificate — it could SAVE you THOUSANDS at settlement. If you don’t have one, the buyer is legally required to withhold part of your payment — delaying and reducing what you receive. Applying is free and easy — and Ascent Accountants can help you get it sorte

Is your TPAR lodged? Don’t be penalised this August.

July 14, 2025
If your business paid contractors during the last financial year — think tradies, cleaners, and more — you may need to lodge a Taxable Payments Annual Report (TPAR). Missing it (deadline: 18 August!) can lead to late penalties. Not sure if you need to lodge or what to incl
More Posts