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Plenty of Australians now split their week between the office and the kitchen table, and the question that follows at tax time is always the same. Work from home tax deductions are one of the ATO’s standing focus areas, and for your 2025-26 return there are two ways to claim: the fixed rate method at 70 cents an hour, or the actual cost method. This guide covers how each one works, the records each one needs, and which tends to suit different home setups.
The bigger number on paper is not always the right pick. It usually comes down to the records you kept through the year, and whether the claim holds up if the ATO asks you to show your working.
For advice on your own situation, speak with a registered tax agent. If you would like a rough estimate of where you might land this year, our free tax calculator is a good place to begin.
What Work From Home Tax Deductions Actually Cover
You can claim the extra running costs you take on because you work from home. The test is reasonably plain: you spent the money yourself, your employer did not reimburse you, and you have records to prove it. Anything you would have paid for anyway, whether you worked from home or not, is not an additional cost and does not qualify.
Two ATO methods are available for those running costs in 2025-26, and you use one or the other across the year. Neither one lets employees claim occupancy costs such as rent, mortgage interest, house insurance, or council rates, which only arise in limited circumstances. And if your employer pays you an allowance for working from home, that allowance goes into your return as income. If you are still gathering paperwork, our tax return checklist runs through everything else to have ready before you lodge.
The Fixed Rate Method: 70 Cents an Hour
The fixed rate method bundles your main running costs into a single hourly figure. For 2025-26 the rate is 70 cents per work hour, the same rate that applied in 2024-25 and up from 67 cents the year before. Multiply your hours by the rate and that part of your claim is settled.
The 70 cents covers:
- Electricity and gas for heating, cooling, and lighting your work area
- Home and mobile internet or data
- Mobile and home phone usage
- Stationery and computer consumables, such as printer ink and paper
Because those four sit inside the rate, you cannot claim any of them a second time as a separate expense. Furniture and equipment are a different story. Your desk, chair, monitor, and laptop sit outside the rate, so you claim them on top, along with any repairs and maintenance. An item costing $300 or less that you use mainly for work can be deducted in full in the year you buy it, and anything above that is claimed as decline in value over its effective life, work-related portion only.
Take someone who works from home 3 days a week, 8 hours a day, for 46 weeks of the year. That is 1,104 hours, which comes to $772.80 in running costs. Add a $280 desk chair bought in March and the claim lands at $1,052, with the cents disregarded rather than rounded.
The trade-off is the record keeping. You need a record of the actual hours you worked from home across the whole income year, kept as you went, in a timesheet, roster, diary, or spreadsheet. An estimate written up the night before you lodge will not do, and the ATO has been explicit about it in its fixed rate method guidance. You also need at least one bill or receipt for each of the running costs the rate covers.
The Actual Cost Method: Claiming What You Really Spend
The actual cost method works from the ground up. Instead of an hourly rate, you calculate the genuine work-related portion of every running cost, which means your electricity and gas at the rate you actually pay, your internet and phone at your real work-use percentage, your stationery, the cleaning of a dedicated work area, and the decline in value of the equipment you use.
That detail is where the method earns its keep, and also where it gets demanding. You need evidence for every expense you claim, meaning the bills, receipts, and invoices themselves, plus something that shows how you split work use from private use. A representative record of at least 4 weeks, showing your regular pattern, is the usual way to support that split.
One rule catches people out. If someone else is in the room watching television while you work, the lighting and heating were running regardless, so you are not incurring an additional cost and that portion is not claimable. The method rewards a room of your own, and it does not reward a laptop on the sofa.
Which Method Suits Your Home Setup
| Fixed rate method | Actual cost method | |
|---|---|---|
| How it is worked out | 70 cents for every hour worked from home in 2025-26 | The genuine work-related portion of each running cost |
| What sits inside it | Energy, internet, phone, stationery, and consumables, all in one figure | Nothing is bundled, every cost is worked out and claimed on its own |
| Claimed on top | Furniture and equipment, plus repairs and maintenance | Furniture and equipment are part of the same calculation |
| Hours records | Every hour, across the full year, recorded as you go | A record showing your regular pattern, at least 4 weeks |
| Expense records | One bill or receipt for each cost the rate covers | Every bill and receipt, plus evidence of work versus private use |
| Usually suits | A few days a week at home, shared living spaces, simple record keeping | A dedicated room, high running costs, 4 or 5 days a week at home |
Fixed rate versus actual cost for the 2025-26 income year.
For most people who work from home a couple of days a week, share the space with family, and would rather not audit their own power bill, the fixed rate lands close to the mark for a fraction of the effort. Actual cost tends to pull ahead where you are home 4 or 5 days a week, run heating or cooling most of the day in a dedicated room, and carry high energy or internet costs. It only pulls ahead, though, if the paperwork exists. A larger claim you cannot substantiate is worth less than a smaller one you can.
Sole traders working from home have a wider set of options again, including some occupancy costs where the home is a genuine place of business. Our sole trader tax returns page covers how that side works.
What You Cannot Claim
A handful of costs get claimed every year that should not be:
- Coffee, tea, milk, and other general household items, even if your workplace supplies them
- Anything your employer provides or reimburses, such as a work laptop or a phone plan
- Your children’s schooling costs, including tablets, desks, and online learning subscriptions
- Rent, mortgage interest, house insurance, and council rates, for employees in almost every case
The most common error, though, is claiming the same cost twice, once inside the 70 cents and again as a separate line for phone or internet. Choose a method and stay with it for the year. If you are unsure what else applies to your line of work, our deduction finder covers common claims by category.
Your Work From Home Records Checklist
Work through this before you lodge:
- A record of every hour worked from home in 2025-26, kept at the time you worked them
- One bill for each running cost, being energy, internet, phone, and stationery
- Receipts for any desk, chair, monitor, or laptop bought during the year
- The work-use percentage for each item, and a note on how you worked it out
- A 4-week diary of your usage pattern, if you are using actual cost
- Everything stored for 5 years from the date you lodge
Solid work from home tax deductions come down to the records you kept, not the method you picked.
Get Ready for Tax Time With Accountants Direct
You do not have to work out which method suits you on your own. At Accountants Direct, you deal directly with registered Australian tax agents, with fixed pricing, no surprise bills, and phone or online appointments, including after hours. Bring your hours and your bills, and we will run both methods and claim the one that leaves you better off.
Here is how to get started
- Run a quick estimate with our free tax calculator
- Book a call online or call 1300 829 746
- Bring your work from home hours, your bills, and any equipment receipts
- Get a clear plan, often on the same call
Frequently Asked Questions
The ATO fixed rate is 70 cents for every hour you work from home, the same rate as 2024-25 and up from 67 cents in 2023-24. It covers electricity and gas, internet, mobile and home phone use, and stationery and computer consumables in a single figure.
Yes. Furniture and equipment sit outside the rate. If an item cost $300 or less and you use it mainly for work, claim it in full in the year you bought it. Above $300, you claim the decline in value over the item’s effective life, and only the work-related portion.
No. Neither method requires a dedicated home office for running costs, so a kitchen table is fine. A dedicated work area only matters for cleaning costs and, in limited circumstances, occupancy costs.
You cannot use the fixed rate for any part of the year where the hours were only estimated. You can still claim for the period you did record, and the practical fix is to start a timesheet or calendar log now so 2026-27 is covered from the first day.
Yes. Pick whichever method suits each income year, based on the records you actually have for that year. What you cannot do is use both methods for the same running costs in the same year.
Employees generally cannot. Occupancy costs only come into play in limited circumstances, usually where your home is a genuine place of business, and they can affect the capital gains tax position on your home. Speak with a registered tax agent before going down that path.
