Claiming WFH Electricity: A Company Guide to ATO Rules

• Tax
• Small Business
• Accounting

Operating your company from your rental home is a common practice. However, when it comes to claiming expenses like electricity, the rules for a company are different and more formal than those for a sole trader.

As a director or employee, you cannot personally claim the deduction on your individual tax return. Instead, the company must reimburse you for the business-related portion of the expense. The company then claims this reimbursement as a tax-deductible business expense.

Here’s a step-by-step guide on how to manage this correctly.

The Correct Process for a Company

1. Establish a Home Office Agreement: It is best practice to have a formal agreement (e.g., a director’s resolution or a simple written agreement) between you (the employee/director) and your company. This document should state that the company will reimburse you for the legitimate, work-related portion of your home office running expenses, including electricity.
2. Calculate the Business Portion: You need to work out what percentage of your electricity usage is for business purposes. The ATO provides two main methods for this.
3. Submit an “Expense Claim” to Your Company: Provide your company with the electricity bill and your calculation.
4. The Company Reimburses You: The company pays the calculated business amount from the company bank account to your personal bank account. This is a non-taxable reimbursement for you personally.
5. The Company Claims the Deduction: The company records this payment as a “Utilities Expense” or “Home Office Expense” in its accounting software and claims it as a tax deduction in the company’s tax return.

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How to Calculate the Business Portion of Your Electricity Bill

You have two primary methods to choose from. You should choose the one that best reflects your situation and for which you can keep adequate records.

Method 1: The Actual Cost Method (More complex, but potentially a larger claim)

This method involves calculating the specific, actual cost of your business electricity usage. The most common way to do this for general power is by using the “floor area” method for your dedicated workspace.

How it works:

1. Calculate the size of your dedicated work area as a percentage of your total home’s floor space.
2. Apply that percentage to your total household electricity bill to find the portion attributable to lighting, heating, and cooling that space.

Example: Actual Cost Method (Floor Area)

Let’s say you have a dedicated home office used exclusively for your business.

• Total size of your rental home: 120 square metres
• Size of your dedicated home office: 12 square metres
• Your quarterly electricity bill: $500 (incl. GST)

Calculation:

1. Work out the floor area percentage: (12 sqm office / 120 sqm home) = 10%
2. Calculate the business portion of the electricity bill: $500 x 10% = $50.00

Process:

• You submit the $500 bill and your 10% calculation to your company.
• The company pays $50.00 from its business account to your personal account.
• The company records a $50.00 electricity expense.

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Method 2: ATO Fixed Rate Method (Much simpler, less record-keeping)

This is the easiest method. The ATO sets a fixed rate per hour that you work from home. This rate covers all additional running expenses, including electricity, gas, internet, mobile phone, stationery, and computer consumables.

• Current Rate (from 1 July 2025): 70 cents per hour.

How it works:

You just need to keep a record of the total number of hours you worked from home during the period. A timesheet, diary, or a representative 4-week logbook is sufficient.

Example: Fixed Rate Method

Let’s assume you work from home for a full quarter (13 weeks).

• Hours worked per week: 40 hours
• Number of weeks in the quarter: 13 weeks
• ATO fixed rate: $0.70 per hour

Calculation:

1. Calculate total hours worked from home: 40 hours/week x 13 weeks = 520 hours
2. Calculate the total claim amount: 520 hours x $0.70/hour = $364.00

Process:

• You submit your timesheet showing 520 hours worked to your company.
• The company pays $364.00 from its business account to your personal account.
• The company records a $364.00 “Home Office Expense”.

Important Note: If you use the fixed rate method, you cannot claim other running expenses like internet or phone bills separately. However, the company can still make separate claims for the decline in value (depreciation) of office furniture and equipment.

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Summary: Which Method Should You Choose?

Feature	Actual Cost Method	Fixed Rate Method
Simplicity	Low. Requires detailed calculations and apportionment.	High. Simple multiplication of hours worked.
Record Keeping	High. Need all bills, floor plan, calculations.	Low. Need a logbook/diary of hours worked.
What’s Included	Only what you calculate (e.g., electricity). You claim other costs like internet separately.	All running costs (electricity, internet, phone, stationery).
Potential Claim	Potentially higher if you have a large, dedicated work area and high utility bills.	Capped by the hours you work. Might be lower.

Simplify Your Record-Keeping with Accounting Software

Keeping accurate records is non-negotiable when dealing with the ATO. Manually tracking bills, calculations, and reimbursements can be cumbersome and prone to error. This is where modern free accounting software becomes invaluable.

Using a platform like Gimbla allows you to:

• Digitally store copies of your electricity bills and your calculation worksheets.
• Track reimbursement payments from the company to your personal account.
• Categorize the expense correctly for your end-of-year company tax return.

This creates a clean, auditable trail that proves the legitimacy of your claims. Good software ensures you stay compliant and makes tax time significantly less stressful.

Key Takeaways for Your Company

• The company makes the claim, not you personally. This is the most important rule for company structures.
• The mechanism is reimbursement. The company pays you back for the business portion of the cost.
• Documentation is crucial. Keep a copy of the reimbursement agreement, electricity bills, your calculations or logbook, and proof of payment from the company to you.
• Renting vs. Owning: The fact that you rent makes no difference to how you claim running expenses like electricity. The process is the same.

Disclaimer: This information is general in nature and does not constitute financial advice. Tax laws can be complex and change over time. It is highly recommended that you consult with a registered tax agent or accountant to get advice tailored to your specific business situation.