Working out your WFH expenses this tax time
• Working from home, Deductions, expenses,
To be eligible to claim working from home (WFH) expenses, you need to be genuinely working from home to fulfil your employment duties, not just checking emails or taking occasional calls. You must also incur additional running expenses because of your WFH arrangement. These additional costs can typically include energy expenses for heating, cooling and lighting, home and mobile internet or data, phone expenses, and stationery or office supplies.
When it comes to calculating your deductions, you can choose the “fixed rate method” or the “actual cost method”. For both methods, you’ll need records that accurately track your WFH hours. You can keep a diary or timesheets covering a representative four-week period showing your usual work pattern, or you can maintain a record of your entire year’s WFH hours. You’ll also need documentation showing you’ve incurred additional expenses, such as receipts and bills, and be able to demonstrate the proportion that relates to work.
Fixed rate method: This approach simplifies your calculations by applying a set rate for each hour you work from home. For the 2024–2025 income year, this rate is 70 cents per hour. To calculate your deduction, simply multiply your total WFH hours by 70 cents. Remember, if you choose this method, you can’t claim additional separate deductions for expenses already covered under the fixed rate method, such as stationery supplies.
Actual cost method: This approach requires you to keep detailed records of all additional costs incurred while working from home. You’ll need to track your WFH hours and maintain comprehensive records for all your WFH expenses.
It’s important to understand what you can’t claim when working from home. This includes items your employer might provide at the office, such as tea or coffee or other general household items. You also can’t make a claim for employer-provided laptops or mobile phones, or expenses which your employer has reimbursed.
Making additional claims
You can make separate claims for expenses not covered by either of the above methods, such as work-related technology and office furniture like chairs, desks, computers and bookshelves, as well as repairs or maintenance on these items.
If you use depreciating assets for both work and personal purposes that cost more than $300, you’ll need to calculate the work-related proportion and only claim that percentage as a deduction for the decline in value over the effective life of the item. For items costing $300 or less, such as keyboards or computer mice, you can claim an immediate deduction in the year of purchase rather than depreciating them over time.
Would your claim pass the pub test?
For a work-related expense to be deductible, it must directly relate to earning your income.
The ATO has shared some recent eyebrow-raising work-related expense claims that were rejected: a mechanic tried to claim an air fryer, a microwave, two vacuum cleaners, a TV, and gaming equipment; and, even more ambitiously, a fashion industry manager claimed over $10,000 in luxury clothing and accessories in order to be “well presented” at work and events, dinners and functions.
If you’re unsure whether an item you want to claim qualifies as an allowable work-related expense, check the ATO website for guidance or speak with your registered tax agent before including it in your return.
Car expenses: using the cents per kilometre method
The cents per kilometre method is a simple way to work out how much you can deduct for car-related work or business expenses. Only individuals, including sole traders, or partnerships (where at least one partner is an individual) can use the cents per kilometre method to claim for use of a car. So if you operate your business through a company or trust, the business will have to use the actual costs method to claim car and vehicle running expenses.
The cents per kilometre rate takes into account all your car running expenses (including registration, fuel, servicing and insurance) and depreciation.
How does the cents per kilometre method work?
To work out how much you can claim as a deduction, you simply multiply the total work/business kilometres you travelled by the appropriate rate.
The rate for the 2024–2025 tax year is 88 c/km. The rate for the 2023–2024 tax year was 85 c/km. The rates are usually updated each year.
Importantly, you cannot claim more than 5,000 work/business kilometres per car, per year. So if you use your car for more than 5,000 kilometres a year for work or business purposes, you will need to use the logbook method to calculate your deductible car expenses.
You don’t need written evidence to show exactly how many kilometres you travelled (although the ATO may ask you to show how you worked out your work/business kilometres, for example diary records).
What is considered a “car”?
The cents per kilometre (and logbook) method only applies to cars. For tax purposes, a car is a motor vehicle (including a four-wheel drive) designed to carry a load of less than one tonne and fewer than nine passengers.
This means utes are generally not cars for tax purposes and thus you cannot use the cents per kilometre (or logbook) method to calculate your deductible ute expenses. You will have to use the actual costs method instead.
Apportioning private use
If you use a motor vehicle for both work/business and private use, you must be able to correctly identify and justify the percentage that you are claiming as work/business use. You cannot claim a deduction for the percentage that is for private use. This is an area where the ATO often sees errors made.
You can use a logbook or diary to record private versus work/business travel.
Note that travelling between your home and your place of work/business is considered to be private use, unless your home is considered to be your place of work, or you operate a home-based business and your trip was for work/business purposes.