What Is the Fixed Rate Method for Work-Related Deductions in Australia?

What the 70 Cents Per Hour Covers

Before claiming, it helps to know which expenses covered by the rate can no longer be claimed separately.

The 70 cents bundle the following additional running expenses:

• Electricity expenses and gas used to heat, cool, or light your workspace

• Internet expenses for both home and mobile data

• Mobile phone expenses and home phone expenses

• Stationery and computer consumables such as paper, ink, or external hard drives

Because these items are included, you cannot take an additional separate deduction for them. Attempting to double-dip is a common audit trigger.

Expenses You Can Still Claim

While many costs are rolled in, the fixed rate method lets you claim a separate deduction for:

• Depreciating assets—for example, a laptop, monitor, ergonomic chair, or other office furniture

• Repairs and maintenance on that equipment

• Small tools under $300 used mainly for work

• Cleaning a dedicated home office space that is used solely for employment duties

These amounts are claimed at either cost or by spreading the decline in value over the item’s effective life.

Eligibility Rules You Can’t Ignore

The ATO sets three conditions to protect against inflated claims:

1. All the hours must be work-related. Checking one email after dinner won’t qualify. Make sure the hours represent real tasks tied to income.

2. You incur an extra cost as a direct result of working from home. If children already stream TV in the room where you work, your heating expense may not rise, so that time may not count.

3. Record keeping is essential. From 1 March 2023 onward, you must track actual hours for the entire income year—spreadsheets, time-tracking apps, or a daily diary each workday. Four-week samples are no longer accepted. You also need one document (for example, a utility bill or phone statement) to prove each expense type listed earlier.

Fixed Rate versus Actual Cost Method

Choosing the better option comes down to two factors: administration effort and potential savings.

Administrative Effort

The fixed rate method requires only two sets of figures: (1) hours worked from home and (2) at least one receipt for every bundled cost. There’s no need to work out a work-related portion of each bill.

By contrast, the actual cost method demands detailed records—every home expense that relates to work, its work-related use percentage, and sometimes floor-space calculations for occupancy costs like mortgage interest or rent. If paperwork makes you sigh, the rate method will likely feel friendlier.

Potential Size of Deductions

Imagine two employees who each log 1 800 hours at home:

• Under the revised fixed rate, their claim deductions equal 1 800 × $0.70 = $1 260.

• Under the actual method, they must total separate figures for electricity, internet, phone, computer consumables, and so on. If those actual expenses exceed $1 260, the extra paperwork pays off. If not, the flat rate wins.

Hybrid workers with lower hours worked often find the fixed rate more generous than their share of the internet or other running expenses. Heavy users of power-hungry equipment might favour the actual method instead.

Step-By-Step Guide to Claiming the Fixed Rate

1. Count your hours. Use rosters, calendar invitations, time-tracking software—whatever captures all the hours you carried out employment duties at home.

2. Keep supporting documents. Save at least one bill for energy, phone, and internet, plus stationery receipts.

3. Calculate your deduction. Multiply total hours by 70 cents to arrive at the fixed rate amount.

4. Add deductions for assets. If you purchased a chair or computer, calculate its depreciation or claim the immediate write-off if under $300.

5. Include figures in your tax return. Enter the rate method claim under working from home expenses. Enter separate amounts for depreciating assets and any allowable occupancy expenses if you have a dedicated home office.

6. Store records for five years. The ATO can ask for evidence long after the year ends, so keep digital copies safely backed up.

Common Mistakes That Trigger ATO Queries

Mistakes tend to fall into three buckets:

• Double-counting costs—for example, using the 70 cents rate and then also claiming mobile phone costs.

• Inadequate records—estimating time instead of logging every day of the year.

• Minimal tasks—logging a few personal admin calls as “working from home.” Claims must align with genuine employment duties.

Using a tax agent can help you avoid these pitfalls and keep you aligned with professional standards legislation.

When a Dedicated Home Office Matters

You no longer need a separate room to use the fixed rate, but having a dedicated home office still brings advantages:

• You may claim a slice of occupancy expenses—such as mortgage interest, rent, or rates—under the actual cost method if the space is used solely for work.

• A clearly defined room strengthens your position if the ATO questions work-related use. Labelled photos and a similar document like a floor plan can reinforce your case.

If your workspace doubles as the kitchen table, limit claims to the revised rate and keep good logs.

Staying Informed About Future Changes

The ATO reviews the fixed rate each year, comparing utility bills and other household data. That means the hour rate could rise (or fall) in future. Keep an eye on updates every July to make sure your claim reflects the current guideline.

Subscribing to ATO updates—or asking your trusted tax agent—helps you stay ahead of changes and makes next year’s return smoother.

Conclusion

The fixed rate method offers a swift path to claiming working from home tax deductions—simply track your hours, multiply by 70 cents, and keep a handful of bills. For many, that simplicity outweighs the legwork required by the actual cost method.

If you expect large energy spikes, high data usage, or expensive new gear, crunch the numbers both ways. The higher figure—properly documented—usually wins. Whichever path you choose, solid record keeping is your safety net.