Work-from-home deductions: keeping client claims defensible
How the methods for claiming home-based work expenses differ, the records each requires, and how to help clients claim confidently without over-reaching.
Working from home has become normal for many employees and business owners, and with it come deductions for the additional running costs. These claims are legitimate, but they are also an area the ATO watches closely, largely because the record-keeping is easy to get wrong. Helping clients claim their home-based work costs confidently, and defensibly, is now a routine part of preparing individual returns.
The methods available
There is generally more than one way to calculate home-based work deductions. A fixed-rate method applies a set rate per hour worked from home to cover a bundle of running costs, while an actual-cost method works out the real additional expense of each item. The methods have different record-keeping requirements, and the better choice depends on the client's circumstances and how well they have kept records.
The current methods, rates, and the records each requires are published by the ATO, and because these details are updated from time to time, it is worth confirming the current rules each year rather than relying on how it worked previously.
Records are where claims fail
The most common reason a work-from-home claim runs into trouble is inadequate records. The fixed-rate method generally requires a genuine record of the hours worked from home across the year, not an estimate made at tax time. The actual-cost method requires evidence of each expense and a reasonable basis for the work-related portion. Either way, the substantiation has to be there.
- Hours: a contemporaneous record of time worked from home.
- Expenses: bills and receipts for the actual-cost method.
- Apportionment: a reasonable work-related percentage for each item.
What is and is not covered
Clients often misunderstand what the fixed rate already includes. Certain running costs are bundled into the rate and cannot be claimed separately, while some items may be claimed in addition subject to the rules. Explaining this clearly prevents the double-counting that turns a legitimate claim into an over-claim.
Set clients up to keep the right records
Because the records have to be kept through the year, the useful advice happens well before tax time. Telling clients at the start of the year what to record, and how, is what makes a clean claim possible. In Finye you can send a document or information request to clients ahead of return season, prompting them to confirm their hours and gather the relevant bills, so the claim is built on real records rather than a rushed estimate. You can see how firms handle client information requests in Finye's guides.
Choosing the right method for the client
The choice of method is not purely a records question, it is also about which produces the better result for a given client. Someone with a dedicated home office and significant running costs may do better under an actual-cost approach, while a client who works from home occasionally may find the fixed rate both simpler and more generous. Running the comparison where the data allows, rather than defaulting to whichever method the client used last year, is a small piece of advice that regularly improves the outcome.
Claim confidently, within the rules
Work-from-home deductions are a genuine entitlement, and there is no reason for clients to leave them unclaimed out of caution. The key is matching the method to the client's records, substantiating the hours and expenses, and applying a reasonable apportionment. Done that way, the claim is both maximised and defensible, which is exactly the balance a good return strikes. A little groundwork early in the year is what makes that possible.