Working from home might feel like second nature by now, but tax time tells a different story. If you’ve spent part of the year working remotely, you could be making a costly mistake.
The ATO has set the work-from-home fixed rate at 70 cents per hour for 2024–25. That’s the rate you’ll use to calculate your deduction for work-related running costs.
But what exactly does it cover? And more importantly, are you using it correctly?
It sounds simple on the surface. Multiply your hours by $0.70 and claim the deduction. But if you don’t understand what’s included or how to record it properly, you’ll lose out.
What the 70 Cents Actually Covers
Here’s where many people get caught off guard. That 70 cents per hour isn’t just for electricity or the heater under your desk.
Under the fixed rate method, the following are bundled together:
- Electricity and gas (for heating, cooling, lighting, and powering equipment)
- Phone and internet expenses
- Stationery and office supplies
- Computer consumables like printer ink and paper
You can’t claim these items again under any other part of your tax return. If you do, your return might be rejected, adjusted, or worse, flagged for review.
This method is convenient, but it’s also very specific in what it covers and allows.
The Rules Have Changed, But Have You?
Remember the shortcut method from the COVID years? It’s gone.
Now, unless you’re using the actual cost method (which involves meticulous record-keeping and receipts), the fixed rate method is your go-to.
Here’s what you need to do:
- Track every hour you worked from home during the financial year.
- Keep records to prove your working pattern, such as timesheets, rosters, or diary entries.
- Proof of expenses (like phone, internet or electricity bill) to show you actually incurred the types of costs covered by the rate.
If you haven’t been doing this already, it’s not too late to start. But you’ll need to be consistent moving forward.
Guesswork isn’t acceptable. The ATO expects clear, consistent documentation.
Why You Should Care
Let’s break this down with a simple example.
If you work from home two days per week, averaging eight hours each time, that’s roughly 832 hours across the year. Multiply that by 70 cents, and you’ve got a $582.40 deduction.
Now, imagine losing that because you didn’t track your hours or assumed you could also claim your internet bill separately. That’s money gone, money that’s rightfully yours.
It’s not just about the size of the deduction. It’s about making sure your tax return is accurate, supported, and won’t trigger any issues later on.
The Most Common Mistakes
Guessing your hours: This is probably the most common mistake. The ATO expects a clear, supportable record of your time working from home.
Double claiming: Remember, the fixed rate covers several key costs. If you also try to claim those separately, you’re likely to run into trouble.
Missing documentation: Even if you tracked your hours, you need to back it up with at least one relevant utility or service bill.
What Can You Still Claim Separately?
Some items can still be claimed outside of the fixed rate, but only if you paid for them yourself and they’re directly related to your work. This might include:
- Office furniture, like a chair or desk
- Equipment, such as a monitor, webcam, or headset
These can be claimed separately using the depreciation method, provided they weren’t reimbursed by your employer.
Final Thoughts
The fixed rate method is designed to make things easier, but only if you follow the rules.
It’s not enough to simply know the rate. You need to understand what it covers, track your hours carefully, and avoid overlapping claims. A little attention now could save you from headaches (or a smaller refund) later.
So, take a moment to review your setup. Are your records solid? Have you been keeping track of your hours since 1 July 2024? If not, today’s the day to start.
Because when it comes to tax time, accuracy isn’t optional; it’s essential.
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