COVID-19 Home Office Deductions: How to Claim in Your 2021 Tax Return

With millions of Australians working from home due to COVID-19 restrictions, the ATO introduced a simplified method to help employees claim their home office running expenses. Understanding the right method for your situation could result in a significantly larger tax refund.

The Three Methods Available for 2020–21

For the 2020–21 financial year, the ATO offered three methods for claiming home office running expenses:

1. The Shortcut Method (80c per hour)

The ATO introduced a temporary shortcut method of 80 cents per hour for all working-from-home running expenses from 1 March 2020 to 30 June 2021. This all-inclusive rate covered electricity, internet, phone, and decline in value of office furniture and equipment.

To use this method, you needed to keep a record of the hours you worked from home — either a diary, timesheet, or roster. The simplicity made it popular, but for many people it resulted in a lower deduction than the other methods.

2. The Fixed Rate Method (52c per hour)

Under the existing fixed rate method, you could claim 52 cents per hour for running expenses such as lighting, heating and cooling, and cleaning. Additionally, you could separately claim the work-related portion of your phone, internet, and computer depreciation on top of the 52 cent rate.

This method required a dedicated work area in your home and keeping a four-week diary to establish your usual working pattern.

3. The Actual Cost Method

The actual cost method involves calculating the real work-related portion of every expense — electricity, gas, internet, phone, decline in value of equipment, repairs, and cleaning. This method delivers the largest deduction for those with a dedicated home office but requires the most detailed record-keeping.

You needed to be able to demonstrate the floor area of your dedicated work area as a proportion of your total home, and keep all receipts for the relevant expenses.

Which Method Was Best?

The right method depended on your individual circumstances. As a rough guide:

• If you worked from home for many hours but had relatively low actual expenses, the shortcut method (80c/hour) may have been best
• If you had high internet and phone costs and worked from a dedicated office, the fixed rate or actual cost method typically produced a better result
• Those with home offices in larger houses with high utility costs often benefited most from the actual cost method

What You Could NOT Claim

Regardless of which method you used, the following could not be claimed as home office deductions:

• Mortgage interest or rent (these only apply to tax purposes if you run a business from home and have a dedicated workspace not used for private purposes)
• Coffee, snacks, or other personal consumption
• Items that were already reimbursed by your employer
• Costs related to childcare or personal activities

Still Need to Lodge or Amend a 2021 Return?

If you believe you may have under-claimed or missed home office deductions in your 2020–21 tax return, it's not too late to amend — you generally have two years from the date your assessment was issued to request an amendment (three years for most individuals). Contact us to discuss whether an amendment is worthwhile in your case.

For current-year home office deductions, read our updated guide: Working From Home Deductions 2025: Which Method Works Best?