The work from home deduction landscape changed significantly with the ATO's 2023 revision to the fixed rate method, and the impact is still being felt in 2026 EOFY reconciliations. Many clients are still using the old 80 cents per hour shortcut method — which was discontinued — or are unaware that the revised fixed rate method has different record-keeping requirements than its predecessor.
As a bookkeeper, your role is to ensure the deduction your client claims is supportable, correctly coded, and reflects what they actually spent. Here's what you need to know.
The Three Methods (and Which One Still Exists)
There are currently two legitimate methods for claiming work from home expenses in Australia. The old 80 cents per hour COVID shortcut method was discontinued after 30 June 2022 — any client still referencing it in their 2026 return has a problem.
Revised Fixed Rate Method (67 cents per hour)
The revised fixed rate method covers electricity and gas, internet expenses, mobile and home phone usage, and stationery and computer consumables. It does NOT cover depreciation on home office assets (furniture, equipment) — those must be claimed separately.
The key record-keeping change from the old method: clients must keep a record of ALL actual hours worked from home, not just a sample period. A diary or log that covers the entire income year is required. The ATO has been reviewing these claims, and reconstructed or estimated records have been rejected.
Actual Cost Method
The actual cost method involves calculating the actual additional costs incurred from working from home, including the work-related proportion of electricity, internet, phone, cleaning, and depreciation on office furniture and equipment. This requires keeping receipts for every expense and calculating the work-related percentage using a reasonable basis (floor area proportion, usage logs, or similar).
The actual cost method delivers a larger deduction for clients with a dedicated home office, but the record-keeping burden is significantly higher. It is generally only worthwhile for clients who have clearly delineated home office space and have kept thorough records throughout the year.
Record-Keeping Requirements by Method
Getting the records right before 30 June matters — the ATO does not accept reconstructed records after the fact.
For the fixed rate method: a log of hours worked from home for the full income year. Acceptable formats include a calendar notation, a timesheet, a roster, or electronic records from work systems showing when the client was working remotely.
For the actual cost method: receipts for all claimed expenses, a record of the work-related usage percentage (for shared expenses like phone and internet), and evidence of the floor area proportion if claiming occupancy costs.
One thing that often catches clients: the fixed rate method does NOT allow a separate claim for phone and internet. If a client claims 67 cents per hour AND a separate internet deduction, they have a problem. Only actual costs method allows internet to be claimed separately.
What Bookkeepers Need to Code
For the actual cost method, home office expenses will typically flow through as:
- Electricity/gas: Code to Home Office Expenses or a relevant overhead category. Capture the work-related proportion only — if the client's home office is 15% of floor area, code 15% of the electricity bill to the business.
- Phone and internet: Code the work-related proportion. If the client uses their phone 60% for business, code 60% of the plan cost.
- Asset depreciation: Depreciation on office furniture and equipment used for work is a separate claim. This usually sits outside standard bookkeeping and is handled in the tax return via the depreciation schedule.
For the fixed rate method, clients typically don't run the calculation through their business books at all — it's a personal deduction claimed in their tax return based on hours recorded. Your job is to ensure they have the hours log and aren't double-claiming expenses.
Common Mistakes to Flag
Claiming occupancy costs without a dedicated workspace. The ATO requires that the area be used "exclusively or almost exclusively" for work to claim occupancy costs (rent, mortgage interest, rates). A kitchen table doesn't qualify. Flag this if a client is claiming occupancy costs and describe their home office setup.
Mixing the methods. A client cannot claim the fixed rate AND separately claim internet costs. One method must be applied consistently for the year.
No hours record. The revised fixed rate method requires a full-year hours log — not a four-week sample. If a client cannot produce this, the deduction is at risk.
Overclaiming mobile phone. The ATO's benchmark for personal use of work mobile phones is 25% for an employee who also has a personal phone. Claims above this attract scrutiny.
Preparing Clients Before 30 June
For clients who work from home and haven't been keeping a log, encourage them to reconstruct the record for as much of the current year as possible using verifiable sources (work systems, calendars, email history). While the ATO prefers a contemporaneous record, a reconstruction from reliable sources is better than no record at all.
The EOFY period is also a good time to review whether the actual cost method might deliver a better outcome than the fixed rate. Run the numbers for clients with large home offices or high electricity costs — the difference can be material.
Good bookkeeping for work from home deductions isn't glamorous, but it's the kind of support that prevents ATO scrutiny and protects clients' deductions when they matter most.