Working From Home Tax Deductions: the Fixed Rate and Actual Cost Methods Explained

There are two ways to work out the deduction, and you choose one for each income year. You cannot mix them within the same year, but you can switch from one year to the next. The fixed rate method gives you a set number of cents for each hour you work from home, which covers several running costs in one figure. The actual cost method works out the real work related portion of each expense separately. The fixed rate method is simpler. The actual cost method can produce a larger deduction if your running costs are high, but it needs more detailed records.

For the 2025 to 2026 income year the fixed rate is 70 cents for each hour you work from home. The rate was 67 cents for 2022 to 2023 and 2023 to 2024, and 70 cents applies for both 2024 to 2025 and 2025 to 2026. It is set under the ATO Practical Compliance Guideline PCG 2023/1. The 70 cents covers the additional running costs for energy, meaning electricity and gas for heating, cooling and lighting, home and mobile internet or data, home and mobile phone use, and stationery and computer consumables such as printer ink and paper. You cannot claim any of these covered costs again on top of the rate. You do not need a separate room or a dedicated work area to use this method.

The fixed rate does not cover the equipment and furniture you use for work. You can claim the work related decline in value, also called depreciation, of items such as a desk, an office chair, a computer, a monitor or a bookshelf, and the repairs and maintenance of those items. If an item cost 300 dollars or less and you use it mainly for work, you can claim its full cost in the year you buy it. If it cost more than 300 dollars, you claim its decline in value over its effective life. Where you use an item for both work and private purposes, you claim only the work related portion.

Under the actual cost method you work out the real work related part of each expense you incur from working from home. That can include the work related portion of your energy, phone, internet, stationery and consumables, the decline in value of equipment and furniture, and the cost of cleaning a dedicated home office. You work out the work related portion using your actual bills and a reasonable basis for splitting private and work use, for example a record of your usage pattern over a representative period. This method takes more record keeping, but it can give a larger deduction than the fixed rate if your running costs are high.

To claim a working from home deduction, you must be working from home to carry out your employment duties, not just doing minimal tasks such as occasionally checking emails or taking calls. You must also incur additional running costs as a result of working from home. If your employer pays for or reimburses an expense, you cannot claim it.

The record keeping rules have tightened. To use the fixed rate method for 2025 to 2026, you must keep a record of the actual number of hours you worked from home across the entire income year, for example a timesheet, roster, diary or similar record kept at the time you work. An estimate of your hours, such as saying you work from home about 30 hours a week, is not accepted. You must also keep at least one record for each type of running cost the rate covers, for example one quarterly electricity bill and one receipt for stationery. For equipment and furniture you claim separately, keep records of what you paid and how much you use each item for work. Keep your records for five years from when you lodge. If you only started keeping an hours record partway through the year, you can only claim the hours you actually recorded.

Most employees who work from home cannot claim occupancy expenses such as rent, mortgage interest, house insurance or council rates. These may be deductible only in limited circumstances where part of your home is a genuine place of business with a dedicated home office, which does not apply to most people who work from home for convenience. You also cannot claim general household items such as coffee, tea, milk or toilet paper, or any expense your employer paid for or reimbursed.

Example only. A person keeps a diary of the hours they work from home and records 760 hours across the 2025 to 2026 year. Under the fixed rate method their running cost deduction is 760 hours times 70 cents, which is 532 dollars. During the year they also bought an office chair for 260 dollars that they use only for work. Because it cost 300 dollars or less, they can claim its full cost. Their total working from home deduction is 532 dollars plus 260 dollars, which is 792 dollars, with cents disregarded. This is an example only. Use the Work From Home Calculator for your own figures.

The fixed rate method suits people who have a clear record of their hours but do not want to split every bill. The actual cost method suits people with high running costs who are willing to keep detailed records and apportion each expense. You can work out both and use whichever gives the larger deduction for the year, as long as you keep the records that method requires.

What is the working from home rate for 2025 to 2026?

70 cents for each hour you work from home under the fixed rate method.

Do I need a separate home office to claim?

No. The fixed rate method does not require a dedicated room or work area.

Can I claim my phone and internet on top of the fixed rate?

No. The 70 cents already covers phone, internet, energy, stationery and consumables. To claim the actual work related portion of your phone and internet separately, use the actual cost method instead.

Can I still claim my desk and chair?

Yes. Equipment and furniture are not covered by the fixed rate. You claim the full cost if an item cost 300 dollars or less and you use it mainly for work, or its decline in value over time if it cost more.

Can I estimate my hours?

No. For the fixed rate method you must keep a record of your actual hours across the whole year. Estimates are not accepted.

Can I claim rent or mortgage interest?

Most employees cannot. Occupancy expenses are deductible only in limited circumstances where part of your home is a genuine place of business.