Working From Home Tax Deductions 2025: ATO Fixed Rate Increases to 70 Cents per Hour
The Australian Tax Office (ATO) has just announced an update that will benefit many Australians who work from home. Starting 1 July 2024, the fixed rate for calculating working from home expenses will increase to 70 cents per hour, up from 67 cents. This change applies to the 2024–25 income year and could mean higher tax deductions for those working remotely.
In this blog, we’ll explain what this means for you, how you can benefit from the new rate, and why keeping track of your working hours is crucial.
What is the ATO’s Fixed Rate for Working from Home Expenses?
The fixed rate method simplifies the process of claiming working-from-home expenses by allowing you to claim a fixed amount per hour worked from home, instead of tracking individual expenses like electricity, internet, or phone bills.
For the 2024–25 income year, the new rate is 70 cents per hour. This increase from the previous 67 cents per hour is good news for those who regularly work from home.
The rate covers the following work-related expenses:
• Home and mobile internet/data
• Phone usage (mobile and landline)
• Electricity and gas for heating, cooling, and lighting
• Stationery and computer consumables
How Much Can You Claim?
Let’s take a closer look at how this works. For example, Gerry is employed as a bookkeeper and works from home 2 days a week. Over the course of the 2024–25 income year, he worked 768 hours from home. Using the 70c per hour fixed rate, Gerry can claim a deduction of:
768 hours × 70c = $537
Gerry doesn’t need to track individual expenses for his internet, phone, or electricity—he just needs to keep a record of the hours he worked from home.
Can You Use the Fixed Rate?
Not everyone is eligible to use the fixed rate method. The ATO requires that taxpayers using this method keep accurate records of the hours they work from home. If you don’t keep track of your hours, you can’t rely on the fixed rate, as Dan’s example shows below.
Example: Dan’s Situation
Dan works as a financial adviser and only works from home 2 days a week, but not consistently. In his claim for the 2024–25 income year, he estimated the hours he worked from home and calculated his expenses. When the ATO reviewed his claim, they found that Dan didn’t have proper records to back up his estimated hours. As a result, he couldn’t use the fixed rate method.
In Dan’s case, the ATO allowed him to claim his actual expenses, but only for the office chair he purchased for $290. Without evidence to support the other claimed expenses, Dan’s total deduction was reduced.
Why This Matters to You
If you work from home, the increase to 70c per hour means you could potentially claim more money without the hassle of tracking each individual expense. However, to benefit from the fixed rate, it’s essential that you:
1. Track Your Hours: Keep a log or timesheet of the hours you work from home.
2. Avoid Estimates: The ATO requires actual records of the hours worked.
3. No Double Claims: If you use the fixed rate method, you can’t claim additional deductions for the same expenses.
What Should You Do Now?
If you’re working from home, start tracking your hours now. With the new fixed rate in place starting 1 July 2024, you’ll want to be prepared for the next tax season. Keep your records up to date, and be ready to claim the 70c per hour deduction on your tax return.
For those who want to explore other methods or need help with their tax filings, contact us for expert advice.
Final Thoughts
The increase to 70c per hour for working from home expenses is a great way for remote workers to claim more deductions with less paperwork. By keeping accurate records of your working hours, you’ll be able to take full advantage of this new rate when filing your taxes for the 2024–25 income year.
Need more information? Reach out to us today and we’ll help ensure you’re maximising your tax savings!
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.
FAQ
Your Questions, Answered.
Every business is different. Let's find the right answer for yours.
A business expense generally needs a sufficient connection to earning assessable income and must not be private, capital or specifically denied. Mixed-use expenses should be apportioned and properly substantiated.
Often yes, although the rules vary between individuals, companies and trusts. Eligibility tests can apply, and supporting calculations and ownership records should be retained.
Division 7A can treat certain payments, loans or debt forgiveness provided by a private company to shareholders or associates as unfranked dividends. Director loan accounts should therefore be reviewed carefully.
An amendment may be required when income, deductions, offsets, CGT or other material details were omitted or entered incorrectly. Time limits vary, so errors should be addressed promptly.
Many tax records are kept for five years, but longer retention can apply to assets, capital gains, carried-forward losses and disputes. Records should be sufficient to explain the tax position claimed.
