Tax time is fast approaching, and the ATO is likely to focus on common areas where errors are made, including work-related expenses and working from home (WFH) deductions. Knowing what you can claim and how to properly document your claims can help you avoid mistakes when lodging your return.

Claiming Working From Home (WFH) Expenses

To be eligible to claim WFH expenses, you need to be genuinely working from home to perform your employment duties. It’s not enough to be just checking emails or making occasional calls. You also must incur additional running expenses because of your WFH arrangement. These expenses may include:

• Energy costs for heating, cooling, and lighting.
• Home and mobile internet or data.
• Phone expenses.
• Stationery or office supplies.

You have two options for calculating your WFH expenses: the “fixed rate method” or the “actual cost method”. For both methods, it’s essential to maintain records that accurately track your WFH hours. You can keep a diary or timesheets covering a typical four-week period, or maintain a full record of your WFH hours for the entire year. Additionally, you’ll need supporting documents like receipts and bills that show you’ve incurred these extra costs and how much of the expense is work-related.

Fixed Rate Method

The fixed rate method simplifies the calculation by applying a set rate per hour worked from home. For the 2024–2025 income year, the rate is 70 cents per hour. To calculate your deduction, multiply the total hours you worked from home by 70 cents.

Important: If you choose the fixed rate method, you can’t claim separate deductions for expenses that are already covered by the fixed rate, such as stationery and supplies.

Actual Cost Method

The actual cost method requires you to keep detailed records of all additional expenses incurred while working from home. You’ll need to track your WFH hours and maintain comprehensive records of all your WFH expenses. This method may involve more paperwork but allows you to claim the actual costs you’ve incurred.

What You Can’t Claim

Certain expenses cannot be claimed under the WFH deduction rules, including:

• Items your employer might provide at the office (e.g., tea, coffee, or general office supplies).
• Employer-provided laptops or mobile phones.
• Expenses that your employer has reimbursed.

Making Additional Claims

You can also make separate claims for expenses that are not covered by either method, such as:

• Work-related technology and office furniture: This includes items like computers, desks, chairs, bookshelves, and other office equipment.
• Repairs and maintenance for these items.

If you use depreciating assets for both work and personal purposes and they cost more than $300, you’ll need to calculate the work-related proportion and claim that percentage for the decline in value over the item’s effective life. For assets costing $300 or less, such as keyboards or computer mice, you can claim an immediate deduction in the year of purchase rather than depreciating them over time.

Would Your Claim Pass the Pub Test?

For a work-related expense to be deductible, it must have a direct connection to earning your income. The ATO has shared some examples of claims that were rejected, including:

• A mechanic trying to claim an air fryer, a microwave, two vacuum cleaners, a TV, and gaming equipment.
• A fashion industry manager claiming over $10,000 for luxury clothing and accessories to “stay well-presented” at work-related events.

If you’re unsure whether an item qualifies as a work-related expense, consult the ATO website for guidance or speak with your tax agent before including it in your return.