The actual cost method lets you claim the genuine additional costs of working from home — electricity, internet, phone, equipment depreciation, and repairs — based on what you actually spend and the proportion used for work. It requires more record-keeping than the fixed rate method but can produce a significantly larger deduction, particularly for those with high energy use, a dedicated home office, or substantial equipment.
What You Can Claim Under the Actual Cost Method
1. Electricity and Gas
Claim the cost of running the lights, heating, cooling, and any equipment in your work area during work hours.
Calculation approach:
- Identify the power consumption of the relevant devices (e.g., desktop computer: ~0.1 kWh/hr; air conditioner: ~2 kWh/hr; lighting: ~0.1 kWh/hr)
- Multiply by the hours used for work
- Apply your electricity rate ($/kWh)
Simpler approach: Use the ATO’s accepted rate of $0.4397/hour for electricity (check the current ATO rate each year — it is updated). This rate approximates the average electricity cost per hour for typical home office running costs.
2. Internet
Claim the work proportion of your annual internet bill.
Determine the proportion through a 4-week usage diary showing:
- Total data used in the period
- Data used for work purposes
Or time-based: hours used for work vs total household use. Apply the resulting percentage to the full annual internet bill.
3. Phone
Claim the work proportion of:
- Monthly call costs (or included plan value)
- Mobile data usage
Maintain a 4-week representative diary showing work vs personal use. Apply the percentage to the full year’s phone costs.
4. Decline in Value (Depreciation) of Equipment
For each item used for work at home:
- Work out the effective life (ATO publishes standard effective lives — computers: 3 years, desks: 10 years, chairs: 10 years, printers: 3 years)
- Calculate annual depreciation = (cost × work-use proportion) ÷ effective life
- For items purchased during the year, prorate to the days owned
Items under $300 with primarily work use can be claimed in full in the year of purchase (immediate deduction rather than depreciation).
| Item | Cost | Work use | Effective life | Annual deduction |
|---|---|---|---|---|
| Laptop | $1,800 | 70% | 3 years | $420/year |
| Office chair | $600 | 100% | 10 years | $60/year |
| Monitor | $500 | 100% | 3 years | $167/year |
| Desk | $400 | 100% | 10 years | $40/year |
5. Repairs and Maintenance
Repairs to work-related home office equipment (at the work-use proportion) are deductible in full in the year the repair is made.
6. Cleaning Costs
If you have a dedicated home office (a room used exclusively for work), a proportion of cleaning costs can be claimed based on the floor area ratio of the office to the total home.
What You Cannot Claim Under the Actual Cost Method
- Mortgage interest or rent — these are private occupancy costs for employees (different rules may apply to self-employed)
- General household goods, food, drinks
- The full cost of items used partly for private purposes — only the work proportion
Record-Keeping for the Actual Cost Method
You need to maintain:
- Hour diary of time worked from home (full year)
- Bills and receipts for each expense (internet, phone, electricity)
- 4-week usage diary for phone and internet (to determine work proportion)
- Purchase receipts for all equipment claimed
- Depreciation schedule tracking each asset, purchase date, cost, work-use percentage, and annual depreciation
Is the Actual Cost Method Worth the Extra Effort?
Compare both methods before deciding. The actual cost method is likely to give a better result if:
- You have a dedicated home office with its own electricity meter or significant exclusive energy use
- You purchased substantial equipment (laptop, monitors, furniture) during the year
- Your actual work proportion of internet is high (e.g., full-time remote worker)
If your WFH setup is modest — a laptop at the kitchen table — the fixed rate method may be simpler and the difference in deduction amount may be small.
Frequently Asked Questions
Can I use the actual cost method for electricity without using it for everything else? No. The actual cost method and the fixed rate method are separate approaches applied to the whole WFH deduction. You cannot mix elements from both methods for the same category of expense.
My partner and I both work from home in the same house. Do we each get a claim? Yes. Each person can claim their own WFH expenses independently. Each needs their own diary and proportion calculation. Equipment shared between two workers should be apportioned accordingly.
What if I have a fast NBN plan specifically for work? If you upgraded your internet plan specifically to accommodate work requirements, you can argue the upgrade cost premium is a work-related expense. The base plan cost is apportioned; the work-specific premium may be directly claimable with appropriate justification.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register.