Work From Home Tax Deductions: Rates, Methods and What You Can Claim in 2025-26

Updated 26 July 2026

The current work from home rate: 70 cents per hour

The ATO's fixed rate for 2025-26 is 70 cents per hour worked from home. The same rate applied in 2024-25, up from 67 cents in 2022-23 and 2023-24.

The rate is set under the ATO's practical compliance guideline PCG 2023/1 and covers these running costs in one bundled figure:

• Electricity and gas for heating, cooling and lighting
• Internet
• Mobile and home phone usage
• Stationery and computer consumables (ink, paper)

If you use the fixed rate, you cannot claim any of those items separately. That double-up is the most common error the ATO flags in work from home claims.

What the rate does not cover, and what you can claim on top:

• Depreciation of equipment: laptops, monitors, desks, office chairs
• Repairs and maintenance of that equipment
• Immediate deduction for items costing $300 or less

Method 1: the fixed rate method

Multiply your hours worked from home by 70 cents, then add depreciation on equipment.

Records you need:

• A record of every hour worked from home for the whole year. A timesheet, roster, diary or calendar works. An estimate or a "representative four-week period" is no longer accepted for the hours themselves.
• One bill for each expense category covered by the rate (for example, one electricity bill and one phone bill) showing you actually incurred the cost.
• Receipts for any equipment you claim depreciation on.

Method 2: the actual cost method

You claim the work-related portion of each actual expense: electricity, gas, internet, phone, consumables, cleaning of a dedicated office, plus depreciation. There is no per-hour rate; you apportion real bills.

Records you need:

• Every bill for every claimed expense across the year
• A four-week representative diary showing your usage pattern, plus a defensible basis for each work-use percentage (for example, floor area and hours for electricity, data or time split for internet)

Same person, roughly $820 more under actual cost. The trade is record-keeping: every bill, all year.

Which method pays more?

As a rule of thumb:

• Fixed rate wins on simplicity for anyone working from home one to three days a week with ordinary household bills.
• Actual cost usually wins on dollars if you work from home four or more days a week, have a dedicated office, high energy bills, or expensive internet and phone plans.
• You can choose each year. Run both calculations before you lodge; you are not locked into last year's method.

Either way, the home office claim is one line of a bigger return; our guide to what you can claim on tax covers the rest.

One thing neither method allows for employees: occupancy costs. Rent, mortgage interest, council rates and home insurance are not deductible just because you work from home. Claiming a portion of these generally requires your home to be a place of business, and it can expose your main residence to capital gains tax. Get advice before going there.

Running costs vs occupancy costs: the line that protects your home

Work from home deductions cover running costs: the extra you spend because you work there. Occupancy costs are the costs of having the home at all, and for employees they stay off the table:

The exception is where your home is genuinely a place of business: no other work location is provided, a dedicated area exists, clients visit, the space is identifiable as business premises. Sole traders and some contractors can qualify and claim an occupancy percentage. The price is real: the same percentage of your home loses the main residence CGT exemption for that period, so the deduction claimed today becomes taxable gain at sale. For most people, claiming occupancy costs is a trade worth refusing; if you think your situation qualifies, model both sides first.

What the ATO looks for in WFH claims

Reviews of work from home claims follow a pattern, and the questions are predictable: produce the record of hours (the full-year log, not an estimate), show a bill for each category covered by the rate, explain any phone or internet claimed on top of the fixed rate (the usual double-dip), and justify work-use percentages on equipment. Claims that combine maximum hours, 100% work-use percentages and a phone claim on top of the fixed rate select themselves for review. None of it is hard to defend with contemporaneous records; almost none of it is defensible without them.

What you cannot claim

• Coffee, tea, milk and other household items
• Childcare while you work
• Items your employer reimbursed or provided
• Costs of children's education equipment
• Any expense already covered by the 70c rate when using the fixed rate method

Record-keeping: where claims fail

This article provides general information only, current at the date of publication, and does not constitute personal tax, legal or financial advice. Consider your circumstances or speak with us before acting. Liability limited by a scheme approved under Professional Standards Legislation.