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Working-from-home deductions: the 67c fixed-rate method

Working-from-home deductions are a common source of confusion. The ATO provides two methods - the Fixed Rate method (67 cents per hour) and the Actual Cost method - and choosing the wrong one (or using the old Shortcut method that no longer applies) can reduce your deduction or trigger an amendment.

The 67 cents per hour Fixed Rate method

Applicable from 1 July 2023 onwards. This rate covers:

  • Electricity
  • Gas
  • Home internet and phone usage
  • Stationery
  • Computer consumables (toner, paper)

To claim 67c per hour, you must:

  • Work from home carrying out employment duties (not just checking emails)
  • Have a dedicated work space (not strictly required - you can work at kitchen table with documentation)
  • Keep a record of actual hours worked from home (not just estimates)

Record-keeping under the 67c method requires a representative 4-week diary plus a full logbook for all hours worked from home for the year. From 2023, the ATO has explicitly required hour-by-hour diary entries for the full year, not just a 4-week sample.

Example: 1,200 hours of legitimate WFH per year × 67c = $804 deduction.

The Actual Cost method

Alternative method calculating actual proportions of utilities and assets used for work:

  • Keep records of all utility bills
  • Calculate the work-use proportion (e.g., 1,200 hours WFH ÷ 8,760 hours in year = 13.7%)
  • Apply 13.7% to electricity, gas, and home internet costs
  • Separately claim deductions for depreciation on office furniture, computer, and other equipment

This method often yields higher deductions for heavy WFH workers with expensive home setups, but requires substantially more record-keeping.

The key rule: can’t claim both

You cannot use the Fixed Rate method and separately claim electricity or internet. The 67c covers everything in its list. However:

Separate claims allowed alongside 67c:

  • Depreciation on specific office assets (computer, desk, chair) > $300
  • Consumable work items (files, specific work software)
  • Phone/data costs for a dedicated work mobile (if separate from the one covered in 67c)

What the Shortcut Method was

From March 2020 to June 2022, the Shortcut Method allowed 80c per hour with minimal record-keeping. That method has ended. Some taxpayers still operate as if it applies - it doesn’t.

Strategic choice: Fixed Rate vs Actual Cost

For a typical professional working 3-4 days/week from home (~1,500 WFH hours/year):

Fixed Rate (67c): $1,005 deduction

Actual Cost:

  • Electricity (work portion): $350
  • Gas (work portion): $100
  • Internet (work portion): $400
  • Depreciation on office setup (chair, desk): $200-$400 p.a.
  • Total: $1,050-$1,250

For this profile, Actual Cost is marginally better if diligent record-keeping is maintained. Fixed Rate is simpler.

For a heavier WFH worker (2,000+ hours/year) with premium home setup:

  • Fixed Rate: $1,340
  • Actual Cost: often $1,800-$2,400+

Actual Cost meaningfully wins for dedicated WFH workers.

Records the ATO expects

For Fixed Rate:

  • Hours logbook for the full year (ATO’s 2023 clarification ended sampling)
  • Evidence of employment duties being performed from home

For Actual Cost:

  • Utility bills for the full year
  • Basis for calculating work-use proportions (square metres of workspace, hours of use)
  • Receipts for any assets being depreciated
  • Purchase evidence for any stationery/consumables

Phone and internet when not using Fixed Rate

For Actual Cost method, you can separately claim work-use portions of:

  • Home internet bill (calculate work % of usage)
  • Mobile phone (calculate work % of calls/data)
  • Dedicated work mobile if you have one

Phone diaries showing work-use patterns are helpful at audit.

Office assets and depreciation

Whether using Fixed Rate or Actual Cost, you can separately depreciate office assets purchased for work:

  • Computers/laptops: up to 2 years effective life, diminishing value method
  • Monitors: 4 years effective life
  • Office chairs: 10 years effective life
  • Standing desks: 10 years effective life
  • Printers: 3 years effective life

Items under $300 can be immediately deducted rather than depreciated.

Occupancy costs

A common mistake: claiming rent or mortgage interest as a WFH deduction. You can only claim occupancy costs (rent, mortgage interest, council rates) if your home is a “place of business” - meaning clients visit, you hold out the address as your business premises, or similar.

For most employees working from home for an employer, you cannot claim occupancy costs. This is a significant ATO focus area.

The spare room vs dedicated office distinction

The pre-2023 ATO rules emphasised a “dedicated work area” requirement. The current 67c method is more flexible - you can work at the kitchen table - but the “dedicated” test still applies for some deductions.

If you have a dedicated office or studio used exclusively for work:

  • Strengthens your claim generally
  • Allows higher depreciation claims on assets installed there
  • Can still trigger occupancy cost complications (the “place of business” test)

Recent ATO focus areas

The ATO is actively auditing:

  • Taxpayers claiming Fixed Rate with no hours logbook
  • Taxpayers who claim both Fixed Rate AND separately claim internet/phone
  • Taxpayers claiming 7+ hours/day × 5 days/week for entire year without any leave adjustment
  • Taxpayers claiming depreciation on assets that were actually employer-provided

The strategic approach

For most PAYG employees:

  1. Start with Fixed Rate - simpler, covers most common expenses
  2. If your WFH is intensive (>1,500 hours) or you have substantial work equipment, switch to Actual Cost
  3. Keep a hours logbook from day one of the financial year
  4. Separately track depreciation on office furniture/equipment
  5. Keep receipts for everything

The 67c method is usually the right choice for casual/occasional WFH. Full-time remote workers benefit from Actual Cost despite the record-keeping overhead.