What Is Home Office Depreciation?

Home office depreciation refers to claiming a tax deduction for the decline in value of assets you use for work purposes in your home office. When you buy a desk, office chair, computer monitor, printer, or bookshelf for your home office, the ATO recognises that these assets wear out over time and allows you to claim a portion of their cost each year as a tax deduction.

The key distinction is between assets that cost $300 or less and assets that cost more than $300. Assets costing $300 or less can be claimed as an immediate deduction in full in the year of purchase, provided they are used predominantly for work. Assets costing more than $300 must be depreciated over their effective life, claiming a portion each year until the asset is fully written off.

This is different from claiming running costs like electricity or internet. Depreciation covers the asset itself — the physical items in your office — while running costs cover the expenses of operating that office. The ATO allows you to claim both types of deductions, but the method you use determines what you can claim for each category.

Fixed Rate Method vs Actual Cost Method: Depreciation Rules

The ATO offers two methods for claiming home office expenses: the fixed rate method and the actual cost method. The method you choose determines whether you can claim home office depreciation separately or whether it is included in a flat rate. For FY 2025-26, the ATO's fixed rate is 67 cents per hour worked from home.

Under the fixed rate method (67 cents per hour), the rate covers electricity, gas, the decline in value of home office furniture and furnishings, and cleaning costs. This means if you use the fixed rate method, you cannot separately claim depreciation on your desk, chair, or bookshelves — it is already built into the 67 cent rate. However, you can still separately claim depreciation on items that are not covered by the fixed rate, such as computers, phones, and other electronic devices. You can also claim the cost of consumables like printer paper and ink separately.

Under the actual cost method, you claim the actual expenses of running your home office based on the floor area of your dedicated workspace. This method allows you to claim depreciation on all home office assets separately, including furniture. The actual cost method is generally more beneficial for people with a dedicated home office who work from home regularly, as it can result in higher total deductions.

How to Calculate Depreciation on Home Office Assets

Depreciation on home office assets is calculated using the ATO's effective life schedule. Each type of asset has an effective life — the period over which the ATO expects it to be useful. For example, a desk chair has an effective life of about 8 to 10 years, a desk is around 15 to 20 years, and a computer is typically 4 years. You can use either the prime cost method (straight-line depreciation) or the diminishing value method (accelerated depreciation).

Most taxpayers prefer the diminishing value method because it provides larger deductions in the early years when the asset is newest. The formula for diminishing value is: Base value × (Days held ÷ 365) × (200% ÷ Effective life in years). For example, if you buy a $1,200 desk chair in August 2025 with an effective life of 10 years, the first year's deduction is $1,200 × (365 ÷ 365) × (200% ÷ 10) = $240. In year two, the base value is $960, so the deduction is $960 × 200% ÷ 10 = $192.

Assets Eligible for Home Office Depreciation

The ATO allows depreciation claims for assets you buy and use for work in your home office. Common depreciable assets include desks and desk chairs, bookshelves and filing cabinets, computers, laptops and tablets, monitors and screens, printers and scanners, office lighting, and air conditioning units (if used predominantly for your work area). Each asset must be separately identified, and you need to keep records of the purchase date, cost, and effective life.

Assets that cost $300 or less can be claimed as an immediate deduction in full, rather than depreciated over time. For example, if you buy a $250 desk lamp and a $180 filing caddy, you can claim the full $430 in the year of purchase, provided they are used for work purposes. This "instant write-off" for low-cost assets makes the actual cost method particularly attractive for setting up a new home office, as you can claim many smaller items immediately.

The ATO also maintains a low-value pool for assets costing less than $1,000. Under the low-value pool method, you pool all eligible assets and claim a flat 37.5% deduction each year on the declining balance. This simplifies record-keeping because you do not need to track each asset individually. The low-value pool method is useful if you have many low-cost assets and want to avoid calculating each one separately.

Work-From-Home vs Dedicated Home Office

The ATO distinguishes between working from home occasionally and having a dedicated home office. If you work from a dining table or living room couch, you are still eligible to claim running costs (electricity, internet) and the decline in value of your electronic devices like your laptop. However, claiming depreciation on furniture like a dining table is generally not allowed because it is not an asset you purchased specifically for work.

If you have a dedicated home office — a room or clearly defined area used exclusively for work — you can claim depreciation on all office furniture and equipment in that space. You can also claim a portion of your home's occupancy costs (such as mortgage interest or rent, council rates, and home insurance) if your home office is a genuine place of business. However, occupancy costs are generally only available to sole traders and business owners, not employees working from home under a work-from-home arrangement.

For most employees, the depreciation claim will be limited to home office furniture and electronic devices. If you are self-employed or run a business from home, you may be able to claim a broader range of expenses. The Medicare Levy applies to your total taxable income after deductions, so reducing your taxable income through depreciation also reduces your Medicare levy liability.

Record-Keeping Requirements for Depreciation Claims

The ATO requires you to keep detailed records of all home office depreciation claims. For each asset, you need the receipt showing the purchase date and cost, a description of the asset, the percentage of work use (for assets used partly for personal purposes), and the effective life you are using for the calculation. If you use the diminishing value method, you also need to track the declining base value each year.

If an asset is used for both work and personal purposes, you must apportion the depreciation deduction based on your work-use percentage. For example, if you use your laptop 60% for work and 40% for personal use, you can only claim 60% of the depreciation. The ATO expects you to maintain a reasonable basis for your work-use estimate, such as a logbook or usage diary covering a representative period. For home office furniture that is only used in your dedicated work area, 100% work-use is generally reasonable.

You need to retain these records for five years from the date you lodge your tax return. The ATO may request evidence of your depreciation claims in an audit, so maintaining organised records is essential. Digital records stored in accounting software or cloud storage are acceptable, as long as they are legible and can be provided on request.

Worked Example: Home Office Depreciation Calculation

Let us walk through a practical example. James works from home three days per week and has a dedicated home office. In August 2025, he sets up his office and buys a desk ($800), an ergonomic chair ($1,200), a monitor ($500), and a filing cabinet ($200). He already owns a laptop costing $2,500 from the previous year with an adjusted value of $1,500.

James uses the actual cost method and the diminishing value depreciation method. The monitor ($500) and filing cabinet ($200) each cost less than $300 — wait: the monitor costs $500 which is above $300, so it must be depreciated. The filing cabinet at $200 can be claimed immediately. The laptop's existing depreciation continues from the previous year. James claims: filing cabinet $200 (immediate deduction), desk $800 × (200% ÷ 15 years) = $106.67, chair $1,200 × (200% ÷ 10 years) = $240, monitor $500 × (200% ÷ 5 years) = $200, and laptop $1,500 × (200% ÷ 4 years) = $750. His total depreciation deduction for FY 2025-26 is $1,496.67.

At James's marginal tax rate of 30% plus 2% Medicare levy, this depreciation claim saves him $1,496.67 × 32% = approximately $479 in tax. Combined with his running cost claims for electricity and internet, his home office setup provides meaningful tax savings that offset the cost of the equipment.

Frequently Asked Questions

Can I claim depreciation on a desk and chair under the fixed rate method?

No. Under the ATO's fixed rate method (67 cents per hour for FY 2025-26), the decline in value of home office furniture and furnishings is included in the rate. You cannot claim separate depreciation on desks, chairs, bookshelves, or other furniture. However, you can still separately claim depreciation on computers, phones, and electronic devices.

What is the effective life of a computer for depreciation?

The ATO's effective life for computers, laptops, and tablets is generally 4 years. This means the cost is spread over 4 years under the prime cost method, or accelerated using the diminishing value method. However, you can choose a shorter effective life if you can demonstrate the asset is used heavily and will need replacement sooner.

Can I claim depreciation on a phone I use for work?

Yes, if you use your personal phone for work purposes. If the phone cost $300 or less, you can claim an immediate deduction for the work-use portion. If it cost more than $300, you must depreciate it over its effective life (typically 4 years for phones). You can also claim the work-use portion of your phone bill separately.

What happens to depreciation when I stop working from home or sell the asset?

If you stop using an asset for work, you stop claiming depreciation from that date. If you sell the asset, you may need to account for a balancing adjustment — if you sold it for more than its written-down value, the difference may be assessable income. If you sold it for less, you may be able to claim the remaining value as a deduction.

Do I need a dedicated room to claim home office depreciation?

No, but it affects what you can claim. You do not need a dedicated room to claim depreciation on electronic devices (computers, monitors, phones). However, to claim furniture depreciation (desks, chairs, filing cabinets), you need a clearly defined work area used primarily for work purposes. A dedicated room is best, but a specific area in a shared room can also qualify.