Stop Leaving Money on the Table: Your 5 Biggest Work-From-Home Tax Questions Answered

Updated for Tax Time 2025 – because getting your WFH deductions right shouldn’t feel like rocket science

Remember when working from home meant sneaking in a load of washing between Zoom calls? Those days feel like a lifetime ago. Now, for many Australians, the home office has become as permanent as the kitchen table (which, let’s be honest, probably is your office).

But here’s the thing that keeps me awake at night as an accountant: too many hardworking Aussies are missing out on legitimate tax deductions simply because they don’t understand the rules. Or worse, they’re so confused by all the conflicting information online that they don’t claim anything at all.

Every tax season, I sit across from clients who’ve been diligently working from home, racking up electricity bills and wearing out their internet connection, only to discover they’ve been leaving hundreds – sometimes thousands – of dollars on the table.

That stops today.

1. What’s This 70-Cent Fixed Rate Everyone’s Talking About?

Let’s start with the big one. For the 2024-25 income year, the ATO has set the fixed rate at 70 cents per hour for every hour you work from home.

Now, here’s where I see people get excited and start multiplying 70 cents by every waking hour. Slow down, champion. This isn’t a free-for-all.

The 70-cent rate covers your running expenses – things like electricity for lighting and heating, cleaning, phone and internet usage, and even the depreciation on your office furniture and equipment. It’s actually pretty generous when you think about it.

Pro tip from someone who’s seen it all: Use the ATO’s home office expenses calculator. It’s free, it’s accurate, and it’ll save you from those awkward conversations with the tax office later.

But remember, this rate might change each year, so don’t assume next year will be the same. Always check the latest rate – or better yet, let us handle it for you.

2. How Many Hours Do You Actually Need to Work?

Here’s a question I get almost daily: “Do I need to work from home for a minimum number of hours to claim anything?”

The short answer? Nope. There’s no minimum.

But – and this is important – you can’t just claim deductions for checking your emails or taking the odd phone call. You need to be genuinely working from home to fulfil your employment duties.

Think about Sarah, one of our clients who runs a small consulting business. She works from home three days a week, handling client meetings via video calls, preparing reports, and managing her team remotely. That’s legitimate work-from-home activity.

Compare that to someone who occasionally checks work emails on their phone while watching Netflix. See the difference?

You need to:

· Be working from home to fulfil actual employment duties
· Incur additional running expenses because you’re working from home
· Keep proper records (we’ll get to this nightmare topic next)

3. The Record-Keeping Reality Check

Ah, record-keeping. The topic that makes grown adults break out in a cold sweat.

Here’s the deal: the ATO has tightened up the rules. Gone are the days when you could estimate your hours or keep a “representative” four-week diary and multiply it out.

For the fixed rate method, you need records showing all your work-from-home hours between 1 July 2024 and 30 June 2025. That means start time, finish time, every single time you work from home.

I know what you’re thinking: “But I didn’t start keeping records on 1 July!” Don’t panic. Start now. Keep a simple diary, spreadsheet, or use your existing roster or timesheet system. The key is making the record at the time you work, or as soon as possible afterwards.

My advice? Set up a simple system today. Whether it’s a notebook by your computer, a smartphone app, or a basic Excel spreadsheet – just start. Your future self (and your tax refund) will thank you.

4. The Phone Bill Dilemma Solved

“Can I claim my phone bill?” This question comes up in about 90% of my client meetings.

If you’re using the 70-cent fixed rate method, your phone calls and data usage are already covered. You can’t double-dip and claim them separately.

But if you’re going down the actual cost method route (and trust me, think carefully about this), you’ll need to calculate your work-related percentage on a reasonable basis.

Michael, another client of ours, keeps a simple spreadsheet for four weeks each year. He tracks work calls versus personal calls, work internet usage versus streaming Netflix. It’s not glamorous, but it gives him a solid foundation for his deduction.

The bottom line: Four weeks of detailed records can justify your claim for the entire year. It’s a bit of work upfront, but it’s worth it if your phone usage is significant.

5. The Rent Question That Could Cost You Big

This one’s a doozy, and I’ve seen it trip up more clients than I care to count.

Generally speaking, employees can’t claim rent, mortgage interest, or home insurance as part of their work-from-home deductions. These are called occupancy expenses, and they’re usually off-limits.

The exception? If you have a dedicated area of your home set aside exclusively as a ‘place of business.’ But here’s the catch that’ll make your head spin: this could trigger capital gains tax implications when you sell your home.

I once had a client who was thrilled to claim part of his rent, only to discover years later that he’d potentially created a CGT liability on his family home. Not exactly the outcome he was hoping for.

My strong recommendation: Stick with the fixed rate method unless you have a very specific situation that warrants the complexity of the actual cost method. And if you think you might qualify for occupancy expenses, have a chat with us first.

Your Next Steps (Because Knowledge Without Action Is Just Expensive Entertainment)

Look, I get it. Tax can be overwhelming. But you’ve already taken the hardest step by getting informed.

Here’s what I want you to do right now:

1. Start keeping records today – even if you haven’t been doing it all year
2. Download the ATO’s home office expenses calculator and have a play with the numbers
3. Be honest about your work-from-home activities – the ATO has sophisticated data matching systems
4. Consider whether the fixed rate or actual cost method works better for your situation

Remember, getting your work-from-home deductions right isn’t just about this year’s tax return. It’s about setting yourself up for success year after year.

And if all this feels like too much (because running a business or managing your career is already a full-time job), that’s exactly why PBS exists. We’ve been helping Australians navigate their tax obligations for over 40 years, and we’d love to help you too.

Ready to stop leaving money on the table? Book a consultation with our team. We’ll review your specific situation, ensure you’re claiming everything you’re entitled to, and set you up with systems that make next year’s tax time a breeze.

After all, you’ve earned those deductions. Let’s make sure you actually claim them.

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Important Disclaimer: This information is general in nature and may not apply to your specific circumstances. Tax laws can be complex and change frequently. For advice tailored to your individual situation, please consult with PBS Accountants & Advisers or another qualified tax professional. This content is not intended as specific financial or tax advice and should not be relied upon as such.