Claiming WFH Expenses: Should You Use the Fixed Rate or Actual Cost Method?

Working from home has become the norm for many Australians but when tax time rolls around, it brings up a lot of questions. One of the biggest? How to claim your work-from-home (WFH) expenses the right way.

The Australian Taxation Office (ATO) allows you to claim deductions for running costs associated with working from home, but choosing the correct method is key. Here’s what you need to know about the two main methods, the Fixed Rate Method and the Actual Cost Method, so you can make an informed decision and maximize your return.

The Two Main Methods to Claim WFH Deductions

The ATO gives you two options for claiming WFH expenses:

• Fixed Rate Method – 70 cents per hour for every hour you work from home.

• Actual Cost Method – Claim the actual amount you spend on expenses directly related to working from home.

Each method has different rules, record-keeping requirements, and implications for your tax return.

Fixed Rate Method: Simpler, but More Limited

As of 1 July 2022, the ATO updated the fixed rate method. For the 2024–25 financial year, it allows you to claim 70 cents per hour worked from home. This rate is designed to cover a bundle of running expenses, including:

• Internet

• Electricity and gas

• Mobile and home phone usage

• Stationery and computer consumables (e.g., printer ink)

However, you cannot claim separate deductions for these items if you use the fixed rate method.

You can still separately claim:

• Work-related depreciation on home office furniture (desks, chairs)

• Equipment (monitors, computers)

• Repairs and maintenance of home office equipment

What you need to do:

• Keep a record of your hours worked from home (e.g. timesheets, rosters, diary entries).

• Keep receipts for any separately claimed items.

The downside?

If your actual running costs are higher than 70c/hour, you won’t benefit from the true cost unless you use the actual cost method.

Actual Cost Method: More Accurate, More Effort

The actual cost method lets you claim only the work-related portion of all WFH expenses but you need to do the maths.

This includes:

• Electricity and gas (based on usage)

• Phone and internet (percentage of work use)

• Cleaning expenses

• Depreciation of furniture and tech

• Equipment costs

What you need to do:

• Calculate your actual usage for each item

• Maintain detailed receipts, bills, and work use percentage calculations

• Keep a record of your work-from-home hours

The benefit? If you’ve invested in a serious home office setup or your usage is high, this method can significantly boost your deduction.

The challenge? It’s time-consuming and requires strong record-keeping. You’ll also need to justify your calculations if the ATO asks.

When to Use Which Method

Wondering which one suits you best? Here's a quick breakdown:

If this sounds like you…	Choose…
You work consistent hours from home, with average expenses and want a no-fuss option	Fixed Rate Method
You’ve bought office furniture, have high electricity or internet usage, or want to maximize deductions	Actual Cost Method

Still unsure? Sometimes a quick calculation of both methods (or a chat with your bookkeeper) can help reveal which one benefits you more.

Record-Keeping Tips: Keep It Clean

Whether you're going fixed or actual, documentation matters. The ATO has made it clear: 

No records = No deduction.

Here’s what to keep:

• Work from home log: Track actual hours worked from home (you can’t estimate anymore)

• Receipts: For purchases and running costs

• Bills and usage breakdowns: Especially important for actual cost claims

• Asset details: For depreciating items

Tip: Digital folders and apps like Xero or Dext can make this easier.

Common Mistakes to Avoid

Avoid these frequent pitfalls that can get your claim knocked back or reduced:

🚫 Estimating hours worked instead of logging them

🚫 Double-claiming items already covered by the fixed rate

🚫 Claiming 100% of phone/internet bills when you also use them personally

🚫 Not apportioning shared expenses (like electricity) fairly

If in doubt, don’t guess, ask!

Need Help? Let Precent Take It From Here

Choosing the right method and getting your deductions right can be tricky—but you don’t have to figure it out alone. At Precent, we help individuals and small business owners navigate WFH claims and all things tax, so you don’t miss a cent or make a costly mistake.

Ready to sort your tax return? Get in touch today and let’s make sure your WFH expenses are claimed right.