Working from home at 70 cents an hour: the fixed rate method explained

Who can use it

Any sole trader who works from home to carry on the business: designing, writing, quoting, bookkeeping, calls, client sessions online, admin. You do not need a separate room; the kitchen table counts. What does not count is minimal or incidental activity, such as checking email for a few minutes or taking the odd call. The hours you claim must be hours of real work.

More than one person in a household can use the method for their own hours, and you can use it even if you also have a shop, clinic or client sites, for the hours you spend working at home.

What the rate covers

The fixed rate is a bundle. For 2024-25 and 2025-26 the 70 cents per hour covers:

• Electricity and gas for heating, cooling and lighting.
• Home and mobile internet.
• Home and mobile phone, including calls and data.
• Stationery.
• Computer consumables such as printer ink and paper.

Because the rate includes phone and internet, you cannot claim any part of those bills separately if you use the fixed rate, even mobile use outside the home. That is the trade-off. See phone and internet deductions for the alternative.

What you can claim on top

The rate does not cover assets or the upkeep of a work space, so these are claimed separately, at the business-use percentage:

• Decline in value of a desk, chair, monitor, computer, printer and other equipment. Items under the instant asset write-off threshold are deducted in the year you start using them; see the instant asset write-off.
• Repairs and maintenance of that equipment.
• Cleaning of a dedicated home office, if you have one.

Occupancy costs (rent, mortgage interest, rates, insurance) are outside both methods unless your home is a place of business; see home office deductions for that rule and its capital gains tax consequences.

The records you must keep

Two things.

A record of actual hours worked from home for the whole income year. Since 1 March 2023 the ATO no longer accepts a four-week representative diary or an estimate for the fixed rate method. Acceptable records include a timesheet, a diary, a roster, a calendar with work blocks, or a log in your bookkeeping software, kept as you go. Reconstructing a year in June is not acceptable.

Evidence that you incurred each type of expense the rate covers. One bill per category is enough: an electricity bill, an internet bill, a phone bill, a stationery receipt. They need to show you paid for the expense; the amounts do not matter because the rate replaces them.

A worked example

A copywriter works from home four days a week, about six hours a day, for 46 weeks: 1,104 hours. At 70 cents that is a $773 deduction. She also bought a $900 monitor and a $450 chair this year, both used 90% for business, so she writes off $1,215 on top. Her phone bill is $80 a month; she cannot claim any of it, because the fixed rate already includes it.

If her phone and internet were heavily business-related, she would run the actual cost method as a comparison: business share of energy, internet and phone, plus the same equipment, and pick the higher total.

Fixed rate or actual cost?

The fixed rate wins on simplicity and for anyone with modest home running costs. The actual cost method tends to win when you have a dedicated room, heavy air conditioning or heating use, large phone and data bills for the business, or a lot of hours. It needs receipts for every expense and a basis for each apportionment (floor area for energy, itemised bills for phone). Work out both once and choose; you can change method each year.

Keeping the hours without thinking about it

The hours record is the whole method, and a calendar is the easiest way to keep it: a recurring block for the hours you normally work at home, adjusted on the days that differ. FlowFi lets you log working-from-home hours alongside your transactions each week, so at 30 June the annual total is already there, next to the equipment purchases it categorised from your bank statement.