Work from Home Tax Deductions: A Comprehensive Guide for 2025
Estimated reading time: 7 minutes
Key Takeaways
- Your work-from-home setup affects your available tax deductions in 2025.
- The ATO has updated its guidelines for claiming home office expenses.
- You can choose between the updated fixed rate method and the actual cost method for deductions.
- Keeping good records is essential for maximizing your deductions and ensuring compliance.
Table of Contents
Understanding Work from Home Tax Deductions
Defining Work from Home Expenses
If you work from home, you might be able to claim some of your home office expenses on your tax return. These are costs you wouldn’t have if you weren’t working from home.
Claimable work from home expenses typically include:
- Electricity and gas for heating, cooling, and lighting your workspace
- Work-related internet and phone costs
- Office supplies like stationery, printer paper, and ink
- Depreciation of work equipment such as computers and laptops
- Depreciation of office furniture like desks and chairs
Eligibility Criteria
The ATO has specific eligibility rules you must meet to claim work from home deductions. According to ATO guidelines, you must:
- Work from home to do your job or business (not just because you prefer it)
- Have extra running costs because you work from home
- Have records to prove these costs
Occasionally checking emails or making calls from home isn’t enough. You need to regularly do a significant amount of work from your home office.
Current Methods for Calculating Deductions
Fixed Rate Method (Updated)
The fixed rate method has been updated for the 2024–2025 financial year. From 1 July 2024, the rate is 70 cents per hour for each hour you work from home, up from 67 cents. This covers:
- Electricity and gas
- Cleaning
- Depreciation of home office furniture
- Repairs to home office equipment and furniture
- Phone and internet
This method is simpler because you don’t need to calculate your actual expenses. You just need to keep a record of your work-from-home hours (a diary or timesheet covering a typical four-week period will suffice).
This ATO update makes the fixed rate method even better for many taxpayers because it’s simpler and requires less record-keeping.
Actual Cost Method
The actual cost method involves calculating your specific home office expenses from working from home. This requires:
- Working out the work-related part of your home running costs
- Keeping detailed records of all relevant expenses
- Calculating the percentage of your home used for work
This method is more complex but might give you a bigger deduction if your actual costs are higher than what you’d claim using the fixed rate method. It’s especially useful for people with high home office costs or who use expensive work equipment.
Discontinued Shortcut Method
The shortcut method (80 cents per hour) ended on 30 June 2022. It was a temporary method to simplify claims during the initial increase in remote work.
Car Expenses Claim with the ATO
Understanding Car Expenses for Remote Workers
You can’t claim for your usual commute to and from a workplace. However, you may be able to claim car expenses under certain circumstances.
Claimable work-related car expenses include:
- Travel between different work locations
- Visiting clients or suppliers from your home office
- Attending work-related events
- Collecting work supplies or equipment
- Travel to unusual workplaces when your home is your main workplace
ATO Requirements and Methods
There are two main ways to claim car expenses:
- Cents Per Kilometre Method:
- Claim up to 5,000 business kilometres per year
- A set rate per kilometre (updated yearly by the ATO)
- Minimal record-keeping, but you must show how you calculated the kilometres
- Logbook Method:
- Claim the business-use percentage of all car expenses
- Requires a logbook for at least 12 weeks
- Usually results in bigger deductions for high-mileage business drivers
Choose the method that’s best for you. The cents per kilometre method is usually simpler for occasional trips, while the logbook method is better for frequent trips.
Uniform Tax Deduction
Defining Deductible Work Attire
You may be able to claim a uniform tax deduction even when working from home, if you need specific clothing for work-related video calls or occasional office visits. Deductible work clothing includes:
- Occupation-Specific Clothing: Clothing specific to your job and unsuitable for everyday wear (e.g., a chef’s uniform).
- Protective Clothing: Clothing that protects you from illness, injury, or damage to your regular clothes.
- Distinctive Uniforms: Clothing clearly identifying you as an employee of a specific employer (usually with a logo).
Frequently Asked Questions
What are the main changes in work from home tax deductions for 2025?
The main change is the updated fixed rate method, allowing a 70 cents per hour claim for work-related expenses.
What if I use both fixed rate and actual cost methods?
You must choose one method per deduction. Combining them might cause problems or lead to the ATO disallowing your claim.
Do I need to keep records for all work-related trips?
Yes, accurate records (like a logbook or app) are vital for claiming car expenses.