Work-from-Home Tax Deductions: What You Need to Know for 2025
As the 2024–25 financial year comes to an end, thousands of Australians are preparing to lodge their tax returns, many of whom have worked from home. Recent updates from the Australian Taxation Office (ATO) have clarified how remote workers can claim eligible expenses. Whether you’re a salaried employee, contractor, or small business owner, understanding how to correctly apply these deductions is crucial. Here’s what you need to know. Work-from-Home Tax Deductions; Choosing the Right Method for 2025 In 2025, the ATO continues to offer two methods for claiming work-from-home (WFH) deductions: the fixed rate method and the actual cost method. The Fixed Rate Method (70 cents per hour) Under the ATO’s updated guidance, you can now claim 70 cents per hour for every hour you work from home using the fixed rate method. This rate includes electricity, gas, phone and internet usage, stationery, and computer consumables. Unlike earlier years, you no longer need a dedicated home office to use this method. However, you must keep a detailed log of your work hours, estimates and assumptions are not accepted. If you’re unsure how to apply this method to your situation, our article on how to use the fixed rate method correctly provides a practical walkthrough. The Actual Cost Method If your expenses are higher than what’s covered by the fixed rate, you might benefit from using the actual cost method. This method allows you to claim the precise cost of each expense, including: A portion of home electricity and internet bills Cleaning costs for a home office Office furniture depreciation (like chairs and desks) Work-related subscriptions or tools To claim this way, you’ll need detailed records, including receipts, utility bills, and a diary of hours worked from home. For guidance, see our step-by-step article on calculating your actual WFH expenses. What You Can and Cannot Claim It’s important to understand what is actually deductible. The ATO only allows claims for costs that are directly related to earning your income. Eligible expenses include things like internet usage, mobile phone use (proportionally), and depreciation on office equipment. However, you cannot claim rent, mortgage interest, or household items like coffee or lunch. If you’re unsure, the ATO’s full list of eligible and ineligible WFH expenses is a helpful reference. Common Mistakes to Avoid According to the ATO, common errors in 2025 include claiming without sufficient records, overestimating usage percentages, or attempting to use both methods for the same hours (a practice known as double-dipping). Additionally, the ATO’s Practical Compliance Guideline PCG 2023/1 provides insights into the fixed rate method and the importance of compliance. We’ve also put together a checklist of red flags that can trigger ATO attention to help you avoid trouble. Record-Keeping Requirements The ATO has emphasised that evidence is critical in 2025. This includes: A record of hours worked from home (diary, spreadsheet, or time-tracking app) Receipts or invoices for purchases Copies of bills (electricity, internet, mobile) Depreciation schedules (for assets over $300) If you’re not sure how to prepare your documentation, our tax record checklist can help you get organised before you lodge your return. Who Can Claim? You may be eligible to claim WFH deductions if: You worked from home to fulfil your employment duties (not just occasionally checking emails) You incurred additional running costs as a result You weren’t reimbursed by your employer for those expenses This applies whether you’re a full-time employee, hybrid worker, freelancer, or small business operator. If you’re not sure where you fit, speak with one of our professionals via our contact page for tailored advice. Still Have Questions? Claiming WFH expenses correctly requires understanding the rules, choosing the right method, and maintaining good records. At Tradewise Accounting, we help Australians navigate tax season with confidence. Visit our blog for more insights, or explore our EOFY tax planning hub for additional tools and guides. Final Takeaway The work-from-home deduction can significantly reduce your taxable income, but only if you meet the ATO’s requirements. With the 2025 updates now in effect, there’s never been a better time to review your tax strategy and ensure your records are in order. For the most accurate and current information, visit the ATO’s official working from home expenses page, or speak with a trusted accounting advisor. Ready to Get Tax Time Right? Tax time doesn’t have to be stressful. At Tradewise Solutions, we provide tailored support for individuals and businesses across Australia, ensuring you meet your obligations while maximising your tax position. 📞 Contact us today to schedule a consultation and ensure you’re fully prepared for tax time 2025. Disclaimer The information provided in this information sheet does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Tradewise Solutions before making any decision to discuss your particular requirements or circumstances.
