Hybrid work arrangements — where employees split their time between home and a central office — have become standard operating procedure for a large slice of the Australian SME market. What started as a pandemic necessity has crystallised into long-term workplace policy, and with it has come a new category of bookkeeping complexity that most small business clients weren't prepared for.
For bookkeepers advising SME clients, hybrid work creates obligations across at least four separate areas: home office deductions for employees, employer reimbursements and allowances, fringe benefits tax (FBT) on employer-provided equipment, and record-keeping requirements that need to survive an ATO review.
Home office deductions: employee vs employer perspective
The most common question bookkeepers field is whether home office expenses are deductible — and for whom.
For employees, home office deductions sit outside the bookkeeper's scope (these are personal tax return matters handled by a tax agent). However, bookkeepers often need to understand the two ATO-approved methods to help clients set up appropriate record-keeping systems:
- Revised fixed rate method: 70 cents per hour worked from home (as of 2024–25), covering energy, internet, phone, and stationery. Employees must keep a record of all hours worked from home — a simple timesheet or calendar log is sufficient.
- Actual cost method: Deduct the actual work-related portion of each expense, calculated using floor area or usage apportionment. Requires receipts, usage logs, and apportionment calculations.
For businesses, the deductibility question is simpler — business expenses incurred to set up and maintain employees' home working environments are generally deductible. The key is ensuring those expenses are coded correctly and are clearly business-related.
Employer reimbursements and allowances
Many employers provide cash allowances or reimburse employees for home office running costs. The bookkeeping treatment depends on whether the payment is an allowance or a reimbursement — a distinction the ATO takes seriously.
Expense reimbursements (where the employee provides a receipt and is reimbursed dollar-for-dollar) are:
- Deductible for the employer
- Not assessable income for the employee (they're being made whole, not enriched)
- Coded to the relevant expense account with GST if the underlying expense included GST and the employer is GST-registered
Expense allowances (a flat weekly or monthly payment to cover home office costs, regardless of actual expenditure) are:
- Deductible for the employer
- Included in the employee's assessable income and subject to PAYG withholding
- Reported through STP and shown on the employee's payment summary/income statement
The distinction matters a great deal. An employer who labels a taxable allowance as a "reimbursement" to avoid STP obligations is creating a compliance risk that will surface at audit.
FBT on employer-provided equipment
When an employer provides equipment for use at home — laptops, monitors, phone handsets, desks, office chairs — there are potential FBT implications if the equipment is also available for private use.
The good news is that the work-related portable electronic device exemption (s.58X of the FBTAA) exempts items such as laptops, tablets, and mobile phones from FBT where the device is primarily used for work. The exemption covers one device per employee per FBT year for devices of the same kind.
For office furniture (desks, chairs, monitors), the exemption does not apply. These items may be subject to FBT on the private-use component unless they qualify under another exemption (e.g., the minor benefits exemption where the taxable value is less than $300 and providing the benefit is infrequent).
Bookkeeping implications:
- Track employer-provided equipment separately from general fixed assets — the tax agent needs a clear list to assess FBT exposure
- Code purchase of portable electronic devices as equipment/capital expenditure, not as a deductible running expense
- Flag any employer-provided furniture to the tax agent before the 31 March FBT year-end
Car-related complications in hybrid arrangements
Hybrid work creates a nuanced car benefit situation. If an employee uses a company car or a novated lease vehicle to commute between home and the office, the private-use rules apply to that travel.
Under ATO rules, travel between home and a regular workplace is private travel — not a deductible work expense and not exempt from FBT. This is unchanged by a hybrid arrangement. Even if the employee only goes to the office two days a week, those commuting trips are private use.
Where a home has been formally recognised as a primary place of business — because the employer has no fixed office, for example — the analysis changes. But this requires substantive evidence, not simply a hybrid policy document.
Bookkeepers should ensure that any client running a company fleet or novated leases has a logbook in place for each vehicle. The ATO accepts the statutory formula method as an alternative, but actual-use records are invaluable when the arrangement has changed.
Record-keeping requirements for hybrid arrangements
The ATO is increasingly data-matching employment arrangements with deduction claims. For hybrid work, the records that matter most are:
- Work-from-home logs: Dates and hours worked from home, matching the deduction method used. If the employer provides reimbursements, these logs also support the business-purpose of the payment.
- Expense receipts: For actual-cost reimbursements, the employer should hold the underlying receipts, not just the reimbursement claim.
- Equipment register: A list of employer-provided assets at each employee's home, with purchase date, value, and primary-use description.
- Allowance records in STP: Ensure any home-office allowances paid through payroll are correctly coded in your payroll system and flowing through to STP reporting.
Tools like ReconLink can help bookkeepers keep the transaction-level records clean — ensuring that reimbursements, allowances, and equipment purchases are coded consistently across payroll, accounts payable, and the general ledger. The challenge in hybrid work bookkeeping is rarely any single transaction; it is the coherence of records across multiple systems.
Practical steps for bookkeepers advising hybrid-work clients
- Review the client's hybrid policy document — does it describe payments as allowances or reimbursements? Are the payments going through payroll?
- Check that STP includes any taxable allowances — flat home-office allowances must be included in gross wages.
- Build an equipment register — ask the client for a list of assets at employees' homes and flag any furniture to the tax agent before 31 March.
- Code reimbursements with the correct GST treatment — reimburse with GST code where the expense carried GST; use N-T for expenses that did not.
- Flag car-related questions to the tax agent — the private-use determination for hybrid commuters can be complex.
Hybrid work arrangements are not going away. Bookkeepers who build structured processes for managing the associated obligations will be well-positioned to offer genuine value to their SME clients.
This article was last reviewed on 17 November 2026. Tax rules in this area are subject to change — always refer to the latest ATO guidance at ato.gov.au and consult a registered tax agent for specific advice.