WFH Electricity for Company Directors: Deductions, Reimbursements and FBT

• Tax
• Small Business
• Accounting

An Australian company director has three different working-from-home paths: claim eligible costs personally when they are not reimbursed, receive a company reimbursement that may need fringe benefits tax (FBT) review, or use items and services the company pays for directly. These paths are not interchangeable.

For the 2025-26 income year, the ATO fixed rate is 70 cents for each actual hour worked from home. That rate is a way to calculate a deduction for a taxpayer who incurs the covered costs and keeps the required records. It is not an automatic tax-free company reimbursement rate.

Start with who incurred the expense. A director cannot claim a cost the company reimbursed, and a company should not book a household electricity bill without checking the work-related amount and FBT treatment.

Quick answer

If a director or employee personally pays additional electricity and other running costs, they may be able to claim the work-related amount in their individual tax return when they meet the ATO rules and are not reimbursed. They can use the fixed-rate or actual-cost method.

If the company reimburses a household expense, an expense payment fringe benefit may arise. The otherwise deductible rule can sometimes reduce the taxable value where the employee could have claimed the work-related amount themselves, but the company needs supporting records and may need an employee declaration. Ask the company’s accountant or tax agent to check the deduction and FBT treatment before paying or coding the reimbursement.

This article covers running expenses such as electricity. Rent, mortgage interest and other occupancy expenses have separate and more restrictive rules.

Key points

• Identify whether the director, employee or company legally incurred the expense.
• A person cannot claim a deduction for a cost their employer reimbursed.
• The current fixed rate requires actual working-from-home hours for the full income year, not an estimate based on a sample period.
• A company reimbursement may create an expense payment fringe benefit even when the expense has a business purpose.
• Actual-cost claims need evidence of the cost and a fair, reasonable calculation of the work-related portion.

Start with who incurred the expense

The name on the bill, the person responsible for paying it and the way the company provides support all matter. A household electricity account is usually an obligation of the resident, not the company.

Use the facts to choose the right path.

Do not choose the accounting code first and justify it later. Confirm the legal and tax path, then record the transaction to match it.

When the director claims personally

An employee or director may be able to claim additional running expenses they incur while working from home to perform employment duties. They must have paid the cost, have a direct connection between the expense and their work, and keep records. Costs provided or reimbursed by the company cannot also be claimed personally.

Fixed-rate method

The ATO’s working-from-home fixed-rate guidance sets the rate at 70 cents per hour from 1 July 2024. For the 2025-26 income year, the person must keep a record of the actual hours worked from home across the full income year. Timesheets, rosters or a diary kept as the work occurs can support those hours.

A representative four-week diary is not enough for the fixed-rate hours. The person must also keep evidence that they incurred the expenses covered by the rate, such as an electricity bill and an internet or phone bill where those costs were incurred.

The fixed rate covers:

• electricity and gas used for lighting, heating, cooling and work equipment
• home and mobile internet
• home and mobile phone use
• stationery and computer consumables

Those covered costs cannot be claimed again elsewhere in the tax return. Eligible decline in value for a computer, desk or office chair, and other costs outside the rate, may still be calculated separately.

Actual-cost method

The actual-cost method uses the additional work-related expenses the person really incurred. Keep the bills, receipts, work-use records and calculation for every amount claimed.

A floor-area percentage on its own is not a universal electricity calculation. Heating, cooling, lighting and equipment use can differ, and another household member may already be using the same room or appliance. The method needs to isolate the additional cost caused by working from home and apportion mixed use on a fair and reasonable basis.

The actual-cost method can produce a different result from the fixed rate, but it usually needs more evidence. Use the ATO calculator or ask a tax agent to review the calculation rather than applying a percentage to the whole household bill without support.

When the company reimburses the director

A reimbursement is not automatically tax-free just because the expense relates to work. The ATO says an expense payment fringe benefit may arise when an employer reimburses an employee for an expense or pays a third party for an expense the employee incurred.

Under the ATO’s expense payment fringe benefits guidance, the taxable value is generally the amount reimbursed or paid. An exemption or the otherwise deductible rule may reduce that value, including to nil in some circumstances.

The otherwise deductible rule asks how much the employee could have claimed if the company had not reimbursed the expense. It does not remove the record-keeping job. The company may need an employee declaration or alternative records showing the deductible portion, as well as its FBT calculation and any reporting records.

Before reimbursing a household bill:

1. Confirm the person incurred the expense.
2. Calculate only the supported work-related portion.
3. Keep the bill and the director’s expense claim.
4. Record how the otherwise deductible amount was worked out, if used.
5. Check whether a declaration, FBT return or reportable fringe benefit treatment is required.
6. Reconcile the company payment to the approved claim.

The company may be entitled to a business deduction for an employee expense or FBT it pays, but that conclusion depends on the facts. It should be confirmed rather than assumed from the bookkeeping entry.

When the company pays directly or provides equipment

If the company is the genuine purchaser of equipment or a service, the transaction is different from reimbursing a director’s private bill. Keep the supplier tax invoice in the right name, show the business purpose and document any private use.

Company-provided laptops, phones, furniture and services can have their own FBT exemption or valuation rules. A portable electronic device used primarily for employment may be treated differently from a household utility account. Ask an adviser to review the item instead of treating every company-paid home-office cost as the same type of benefit.

For equipment that the company owns, maintain a fixed asset register and review depreciation separately from electricity and internet costs.

Records to keep before paying or claiming

Keep one evidence trail that explains both the tax position and the accounting entry:

• a written working-from-home or reimbursement policy
• actual hours worked from home for the full income year when using the fixed rate
• household bills and proof the director or employee paid them
• the calculation of additional and work-related use
• the submitted expense claim and company approval
• any employee declaration or alternative FBT records
• the company payment and bank reconciliation
• invoices and asset records for equipment the company bought directly
• advice or review notes for private use, occupancy expenses or unusual arrangements

Retain the records for the period that applies to the deduction, company and FBT obligations. A screenshot of a rate without the underlying hours and bills is not a complete evidence trail.

How to record the payment in accounting software

The bookkeeping should follow the approved treatment. Do not code every payment to a generic utilities expense.

• Record an approved reimbursement against the director or employee expense claim.
• Separate the work-related amount from any private amount that was not reimbursed.
• Keep an FBT liability or adjustment visible where the adviser says one applies.
• Match the reimbursement to the bank payment during reconciliation.
• Keep company-owned equipment in the asset records rather than burying it in electricity expense.

A clear chart of accounts and attached source documents make it easier to distinguish company costs, employee reimbursements, director loans and private spending. Gimbla’s free accounting software can keep bills, payments, reports and bank reconciliation together, but the tax and FBT decision still belongs with the company and its adviser.

The same separation matters for vehicles. Before a company pays or reimburses car costs, compare the company car versus personal car decision.

Common mistakes

• using a sample-period diary instead of full-year fixed-rate hours
• claiming the 70-cent rate personally after the company reimbursed the cost
• treating the ATO hourly rate as an automatic company reimbursement rate
• applying floor area to the whole electricity bill without testing additional cost or mixed use
• claiming phone, internet or energy again after using the fixed rate
• recording a reimbursement without checking expense payment FBT
• mixing company-owned equipment, employee expenses and private costs in one account

Frequently asked questions

Can a company director claim working-from-home electricity?

An eligible director or employee may claim additional working-from-home costs they personally incur and are not reimbursed for. The records and calculation method must support the claim.

What is the ATO working-from-home fixed rate for 2025-26?

The fixed rate is 70 cents per hour for 2025-26. It covers energy, phone, internet, stationery and computer consumables, and requires a record of actual hours worked from home for the full income year.

Is a four-week diary enough for the fixed-rate method?

No. The ATO requires a record of actual hours worked from home across the full income year for the fixed-rate method. A representative four-week diary is not enough for those hours.

Does a company reimbursement create FBT?

It may create an expense payment fringe benefit. An exemption or the otherwise deductible rule may reduce the taxable value, but the company needs the required evidence and should review its FBT position.

In short

Working-from-home electricity is not just a utilities entry for a company director. First establish who incurred the cost. An unreimbursed personal expense may support an individual deduction, while a company reimbursement may create an FBT record and removes the employee’s right to claim the same cost.

Keep the full-year hours, bills, work-use calculation, expense claim, declarations and payment trail. Then ask the company’s accountant or tax agent to confirm the deduction and FBT treatment before the return is prepared.