Working from home tax deduction 2026 rules are important to understand if you work from home, even some of the time, and want to claim the running costs that come with it. The rules have tightened meaningfully over recent years, and what was acceptable a few years ago, such as a rough estimate jotted down at tax time, no longer clears the bar. Before you claim, it is worth checking the ATO’s fixed rate method for working from home expenses, which explains the current record-keeping requirements and what the fixed rate does, and does not, cover.
The two methods
You have a choice between the fixed rate method and the actual cost method, and the right one depends on how much you work from home, how high your actual running costs are, and how comfortable you are with detailed record-keeping throughout the year rather than just at the end of it.
Fixed rate method. For the 2025-26 income year, the rate is 70 cents per hour worked from home. That rate covers electricity and gas, internet, mobile and home phone expenses, and stationery and computer consumables, all bundled into a single per-hour figure. This rate has increased steadily over recent years, from 52 cents in 2021-22, to 67 cents in 2022-23 and 2023-24, to the current 70 cents for 2024-25 and 2025-26.
Actual cost method. This involves working out the genuine work-related portion of every individual expense: your actual electricity bill, your actual internet bill, each apportioned based on your real usage pattern. For a high-usage scenario, working from home 1,200 hours across the year, the fixed rate produces a claim of around $840, while the actual cost method for just the running-cost portion can produce a noticeably higher figure before depreciation is even added. It’s more work, but for people with genuinely high running costs or unusually concentrated work-from-home use, it can produce a meaningfully larger claim.
What the fixed rate does and doesn’t cover
If you use the fixed rate method, you can’t claim a separate deduction for any expenses covered by the rate, such as phone and internet, stationery, and energy. Claiming the 70 cent rate and then also claiming a separate phone bill on top is double-dipping, and it’s one of the more common errors the ATO identifies in WFH claims, often made innocently by people who don’t realise the rate is meant to be comprehensive for those categories.
What you can still claim separately, on top of the fixed rate: decline in value for assets like computers and office furniture, repairs and maintenance of those assets, and cleaning of a dedicated home office area.
Record-Keeping: The part that’s tightened the most
This is where most people fall short, and it’s the area the ATO has been most explicit about over recent years. From recent income years onwards, the ATO has required a real-time record of your actual work-from-home hours, not an estimate written up the night before you lodge.
You need to work out the total number of hours you worked from home during the income year using your records, such as timesheets, rosters, a diary, or a similar document kept at the same time as when you actually worked. A four-week representative diary used to be accepted as a stand-in for the full year, but that’s no longer sufficient on its own. The ATO won’t accept estimates such as a four-week representative diary; records of hours worked from home must be kept as they occur, in any form, provided they’re contemporaneous, things like timesheets, rosters, or a diary kept across the full year rather than reconstructed afterwards.
You also need a record of the expenses covered by the rate that you’ve actually incurred, with at least one bill for each category for which you’re claiming the fixed rate. Practically, this means keeping at least one electricity bill, one internet bill, and one phone bill (if claiming phone use) across the year, so you can show you genuinely incurred those running costs, even though you’re claiming the fixed rate rather than calculating actual amounts for each one.
It’s worth being clear-eyed about what counts as work for these purposes. You can’t claim deductions for time spent on minimal tasks like checking emails or taking the odd call outside work hours; the ATO expects you to be performing substantive work that requires a dedicated space and incurs genuine running costs.
Depreciating assets
If you bought a desk, chair, monitor, or laptop for work use, you can claim the decline in value over the item’s effective life, separately from whichever WFH method you use. Standard effective lives set by the ATO include laptops depreciating over two years, monitors over four years, ergonomic chairs over seven years, and standing desks over ten years. Items under $300 can simply be claimed in full in the year of purchase, no depreciation schedule required.
Choosing between the methods
The fixed rate method offers practical simplicity. If the records of hours are sound, the calculation is straightforward and usually easier to defend than a rough actual-cost estimate. The actual cost method takes more effort but can be worth it where your genuine running costs, particularly electricity, given recent price increases, are well above what the fixed rate assumes.
What’s not deductible
Occupancy expenses, your rent, mortgage interest, council rates, and home insurance, are only deductible in very limited circumstances, generally where your home is your principal place of business and a clearly defined part of it is set aside exclusively for work, with no other use. For most employees working from home as part of a regular arrangement with their employer, this doesn’t apply, and claiming occupancy costs incorrectly can also create capital gains tax complications when you eventually sell your home, since claiming part of your home as a place of business can affect your main residence exemption for that portion.
Get in touch
If you’re not sure if something’s deductible get in touch with our team. We can review your situation, identify the deductions that may apply and help you approach tax time with more confidence.
Your working from home checklist
Choose your method
- Decide between fixed rate (70c/hour) and actual cost based on your circumstances
- Note: you cannot mix methods for the same expense category
Hours record (required for fixed rate method)
- Timesheet, roster, diary, or calendar record of actual hours worked from home
- Kept contemporaneously throughout the year, not reconstructed at tax time
- Covers the full period you’re claiming for, not just a sample period
Evidence of expenses incurred (required even under fixed rate)
- At least one electricity bill
- At least one internet bill
- At least one phone bill, if claiming mobile or home phone use
Separately claimable on top of the fixed rate
- Receipts for desk, chair, monitor, laptop, or other equipment purchases
- Repair and maintenance costs for that equipment
- Cleaning costs for a dedicated home office space
If using the actual cost method instead
- All utility bills for the full year
- A representative diary establishing your usage pattern
- A reasonable, documented basis for the work-use percentage claimed
Not deductible for most employees
- Rent or mortgage interest
- Council rates
- Home and contents insurance
This article is general in nature and does not constitute financial, tax, or legal advice. Individual circumstances vary and you should speak with a qualified adviser before making decisions based on your specific position.