Working from home is now normal for millions of Australians, and many employers pay a remote work allowance to help cover power, internet and phone costs. Others pay nothing and leave employees to claim at tax time. Either way, one question comes up every year: is a remote work allowance taxed, and what can you claim for working from home?
The answer depends on how your employer pays it. An allowance on your income statement is generally assessable income, taxed at your marginal rate. A reimbursement of an expense you actually paid is generally not income. And whether or not you get an allowance, you may still claim a deduction for your extra working-from-home costs — but only once, and only for costs you really incurred. Check the effect of any deduction with our income tax calculator.
What Is a Remote Work Allowance?
A remote work allowance is a separate amount your employer pays on top of your salary. It is an estimate of the extra costs of working from home, not a payment for the exact amount you spent. Examples include a weekly payment towards electricity and internet, a monthly home-office allowance, or a one-off payment to set up a desk and chair. The tax treatment depends on whether the allowance is reported as income and whether you can claim a deduction for the costs it was meant to cover.
Is a Remote Work Allowance Taxed in Australia?
Yes, in most cases. The Australian Taxation Office (ATO) states that you must include all allowances your employer reports on your income statement as income in your tax return. If tax was withheld from it through pay as you go (PAYG) withholding, it forms part of your assessable income and is taxed at your marginal rate, like ordinary salary.
For example, a $50 weekly allowance is $2,600 over a full year. In the 30% tax bracket, the tax on that allowance alone would be $780, plus the 2% Medicare levy — another $52 — a total of $832, before any working-from-home deduction. The 2025–26 resident tax rates are:
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $5,088 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $32,088 plus 37c for each $1 over $135,000 |
| $190,001 and over | $52,438 plus 45c for each $1 over $190,000 |
A worker on a $85,000 salary is in the 30% bracket, so each extra dollar of allowance is taxed at 30 cents plus 2 cents of Medicare levy, unless a deduction reduces taxable income. Check your income statement in myGov — that document, not your payslip, is what the ATO pre-fills into your return.
Allowance vs Reimbursement
An allowance and a reimbursement sound similar, but the ATO treats them differently. An allowance is based on an estimate of what you might spend. A reimbursement is a payment for the actual expense you incurred, such as repaying the exact $89 cost of a work headset after you show the receipt.
As a general rule, you do not include a reimbursement as income, and you cannot claim a deduction for the reimbursed expense — you did not bear the cost. The same principle can apply to an allowance your employer does not report on your income statement. If it appears only on your payslip and you spent the whole allowance on deductible expenses, you do not include it as income — but you also cannot claim a deduction for those expenses. If you spent more than the allowance, you can include the allowance as income and claim a deduction for the full deductible expenses you incurred. There is no automatic deduction for receiving an allowance: you can only claim what you actually spent, with records to prove it.
The Fixed-Rate Method: 70 Cents Per Hour
You can generally claim a deduction for the additional running expenses of working from home, but not for normal household costs you would have paid anyway, or for private expenses. The ATO offers two methods: the fixed-rate method and the actual-cost method. You must choose one method for the full income year — you cannot mix them, or claim the same cost twice.
For 2025–26, the ATO fixed rate is 70 cents per hour worked from home, unchanged from 2024–25 and up from 67 cents in 2022–23 and 2023–24. It is set under the ATO guideline PCG 2023/1. You simply multiply your hours by 70 cents. The rate covers home and mobile internet or data, mobile and home phone use, electricity and gas for heating, cooling and lighting, and stationery and computer consumables such as printer ink and paper. Because these costs are bundled in, you cannot claim any of them separately under this method.
You can claim separately, on top of the 70 cents, the decline in value of equipment and furniture you use for work — a laptop, monitor, desk or office chair — plus repairs and maintenance. Items costing $300 or less and used mainly to produce income can usually be deducted in full in the year you buy them; dearer items are depreciated over their effective life, apportioned for private use. If your employer supplied the equipment, you cannot claim its decline in value.
The Actual-Cost Method
Under the actual-cost method, you claim the work-related share of each actual expense — electricity, gas, internet, phone and stationery — plus equipment depreciation. It takes more record keeping, but it can give a larger deduction if your costs are high, for example if you run energy-hungry equipment or pay for a premium internet plan mainly for work. You need bills, receipts and a reasonable basis for your work-use percentage for every expense, such as a diary of hours or a floor-area calculation for a dedicated office. If you cannot substantiate an expense, the ATO can disallow it.
Fixed-Rate vs Actual-Cost Method
The fixed-rate method suits most employees with typical running costs. The actual-cost method suits people with high bills and good records. Compare them, then use only one method for the year.
| Fixed-Rate Method | Actual-Cost Method | |
|---|---|---|
| Basis | 70c per hour worked from home | Work share of each actual expense |
| Covers | Energy, internet, phone, stationery | Each expense, itemised at real cost |
| Claim separately | Equipment depreciation and repairs | Nothing extra |
| Records | Actual hours for the whole year, plus proof of expenses | Bills and receipts for every expense |
| Best for | Typical running costs | High bills, or a dedicated office |
Worked Example: How Much Is the Deduction Worth?
Sarah works from home three days a week, 7.5 hours a day, for 48 weeks — 22.5 hours a week, or 1,080 hours a year. Under the fixed-rate method, her deduction is 1,080 × $0.70 = $756.
That $756 is a deduction from taxable income, not a $756 refund. On a $80,000 salary, Sarah is in the 30% bracket, so it saves $756 × 30% = $226.80 in income tax, plus $756 × 2% = $15.12 in Medicare levy — $241.92 in total. The ATO gives a similar example: Keisha worked 843 hours from home in 2025–26, giving a deduction of 843 × 70c = $590.
Under the actual-cost method, suppose Sarah’s bills are $1,400 for electricity, $960 for internet and $600 for her mobile, with work-use shares of 30%, 50% and 40%. Her claim would be $420 + $480 + $240 = $1,140, plus stationery and depreciation — well above $756. In that case the actual-cost method wins. With lower bills or a smaller work-use share, the fixed rate would come out ahead, with far less paperwork. Run both calculations before you lodge, and use our income tax calculator to see how each deduction changes your tax.
The No Double-Dipping Rule
The most common working-from-home mistake the ATO flags is claiming the same expense twice. If you use the fixed rate, you cannot also claim internet, electricity, phone or stationery separately — the 70 cents already covers them. If your actual costs are higher, use the actual-cost method instead; do not add separate claims on top of the fixed rate. You also cannot claim an expense your employer paid for or reimbursed, and receiving $2,600 in allowances does not entitle you to a $2,600 deduction — only to the deductible expenses you can prove.
What Records Does the ATO Require?
To use the fixed-rate method, you must keep a record of the actual hours you worked from home for the entire income year. The ATO no longer accepts estimates, a sample week, or a four-week diary scaled up for the year. You need a record kept as you go — a timesheet, roster, diary or log — plus evidence you incurred the covered expenses, such as a power or internet bill. For the actual-cost method, keep every bill and receipt, your work-use calculations, and receipts for any equipment you depreciate. Keep records for five years from the date you lodge.
Other Things to Watch
The old COVID-era shortcut of 80 cents per hour ended after 2021–22 and does not apply for 2025–26. For scale, the national minimum wage is $26.44 per hour from 1 July 2026, so a $756 fixed-rate deduction equals more than 28 hours of gross pay for a minimum-wage worker. A new standard deduction of up to $1,000 for work-related expenses starts from 2026–27, not 2025–26, so do not reduce this year’s claim in anticipation of it.
Frequently Asked Questions
Is a remote work allowance taxable income in Australia?
Yes, usually. If it is on your income statement, include it as income; it is taxed at your marginal rate plus the 2% Medicare levy. If it is only on your payslip and you spent it all on deductible expenses, you may not need to declare it — but you cannot claim a deduction for those expenses either.
Can I claim deductions if my employer pays me an allowance?
Yes, if you incurred deductible expenses and can substantiate them. The allowance is income; the deduction is based on the expenses you actually paid. You cannot claim the allowance amount itself, or expenses your employer reimbursed.
What is the ATO fixed rate for 2025–26?
70 cents per hour worked from home. It covers energy, internet and data, phone use, stationery and consumables. Equipment depreciation can be claimed separately, on top of the rate, but the covered running expenses cannot be claimed again.
Fixed-rate or actual-cost method — which should I choose?
Choose the fixed rate for a simple calculation and typical costs. Choose actual cost if your bills are high and you have good records. Work out both figures and take the larger one, but use only one method for the full year.
What records do I need?
For the fixed rate: actual hours worked from home for the whole year, plus proof you incurred the covered expenses. For actual cost: bills and receipts for every expense, plus work-use calculations. Keep everything for five years after lodging.
Can I claim internet and electricity on top of the 70-cent rate?
No. The rate already includes energy, internet, phone and stationery, so claiming them separately is double-dipping. If your bills are much higher, switch to the actual-cost method for the year instead.
Conclusion
A remote work allowance is simply part of your pay, taxed like the rest of it, with a deduction available for the real costs of working from home. Declare the allowance if it is on your income statement, claim only the expenses you actually incurred, choose one method for the year, and keep records that prove your hours and costs. In our example, that meant a $756 deduction worth about $242 in tax saved at a 30% marginal rate.
Before you lodge, check your income statement in myGov, add up your work-from-home hours, compare both methods, and see the effect with our income tax calculator. A few minutes of checking now is worth far more than a disallowed claim later.