If you work from home in Australia, you can claim a tax deduction for the extra running costs of doing so — and for 2025–26 the simplest way is the Australian Taxation Office’s fixed rate method: 70 cents for every hour you work from home. No bills to apportion, no floor-area calculations, just your hours multiplied by 70 cents, plus depreciation on equipment claimed separately.
This guide explains what the 70-cent rate covers, what you can claim on top, the records you must keep, and when the actual cost method beats the fixed rate. To see what your deduction is worth after tax, use the income tax calculator.
The fixed rate method in one minute
Under the ATO’s Practical Compliance Guideline PCG 2023/1, the fixed rate for 2025–26 is 70 cents per work hour. Multiply your total hours worked from home during the income year by 70 cents, and that is your deduction for running costs. The rate is unchanged from 2024–25, and it replaces the old 67-cent rate that applied in 2022–23 and 2023–24.
The 70 cents is a bundled figure covering: energy costs (electricity and gas for heating, cooling and lighting), phone usage (home and mobile), internet and data, and stationery and computer consumables. Because those costs are already inside the rate, you cannot claim them again separately — claiming your internet bill on top of the fixed rate is the single most common error the ATO flags in work-from-home claims.
What the rate does not cover, you claim separately: decline in value (depreciation) of equipment and furniture such as laptops, monitors, desks and chairs, and repairs to that equipment. Items costing $300 or less that are used mainly for work can generally be claimed in full in the year of purchase; dearer items are depreciated over their effective life. A $1,200 laptop used 80% for work, for example, contributes a depreciation claim each year rather than a single lump sum.
What your claim looks like at different work patterns
Your deduction depends entirely on hours. Assuming a 7.6-hour day over 48 working weeks:
| Days working from home per week | Hours per year | Fixed-rate deduction (70c/hr) |
|---|---|---|
| 1 day | 364.8 | $255.36 |
| 2 days | 729.6 | $510.72 |
| 3 days | 1,094.4 | $766.08 |
| 4 days | 1,459.2 | $1,021.44 |
| 5 days | 1,824.0 | $1,276.80 |
What is that worth in tax saved? A deduction reduces taxable income, so its value equals the deduction multiplied by your marginal tax rate plus the Medicare levy. At a 30% marginal rate plus 2% levy, a $766.08 deduction saves $245.15 in tax. At 37% plus levy, the same deduction saves $298.77. The deduction is valuable, but it is not a refund of the full amount — a point worth remembering when comparing it with the actual cost method.
A worked example in the ATO’s own style: a software engineer working from home two days a week from December logs 567 hours in the remainder of the income year. Her fixed-rate claim is 567 × 70c = $396.90. She also bought a desk ($250) and an office chair ($299), both used only for work and both under $300, so both are claimed in full — a total deduction of $945.90, with cents disregarded rather than rounded in the final claim.
Fixed rate vs actual cost: which wins?
The actual cost method claims the genuine work-related percentage of each running cost: the work share of electricity, internet, phone and consumables, calculated from bills, floor area and usage. It takes far more record-keeping, but it can beat the fixed rate if your actual costs are high — for example, if you run heating and cooling all day in a large dedicated office, or your internet plan is expensive.
As a rough guide, a full-time home worker’s actual running costs often land around $1,200–$1,500 a year, against $1,276.80 under the fixed rate — close enough that the fixed rate usually wins on simplicity unless your bills are unusually high. A part-time home worker with low bills will almost always do better on the fixed rate. You must choose one method for the whole income year; you cannot mix methods or claim the same cost under both.
One thing neither method allows: occupancy costs. Employees working from home generally cannot claim rent, mortgage interest, council rates or home insurance — those are available only in narrow circumstances, such as where a home office is a genuine place of business with no alternative work location. Do not claim occupancy costs on a standard employee work-from-home arrangement; it is a well-known audit trigger.
Records: the part most people get wrong
For the fixed rate method, you must keep a record of the actual hours you worked from home for the whole income year, recorded as you go. Estimates, and the old four-week “representative diary” approach, are no longer accepted for this method. A calendar entry, timesheet, roster or simple log is fine — what matters is that it is contemporaneous and complete.
You also need at least one bill for each type of expense the rate covers — for example, one electricity bill and one phone or internet bill — showing that you actually incurred those costs. You do not need to apportion those bills under the fixed rate method; the bills simply evidence that the costs exist. For equipment claimed separately, keep purchase receipts and a record of work-use percentage.
Keep all records for five years from when you lodge. Work-from-home claims are an ATO compliance focus, and a claim with clean hour logs and bills survives review easily, while a round-number estimate with no records is routinely reduced or denied. Start the log now if you have not already — reconstructing a year’s hours from memory in June is exactly what the ATO rejects.
What changes from 2026–27
From the 2026–27 income year, a new standard deduction of up to $1,000 for work-related expenses applies automatically. Importantly, work-from-home costs you claim reduce that standard deduction dollar for dollar — so if you claim $766 under the fixed rate, your remaining standard deduction capacity falls by the same amount. This interaction means the fixed rate method’s value needs re-examination from 2026–27 onwards, and some workers may find the standard deduction alone is simpler.
For 2025–26, however, the rules are unchanged: 70 cents per hour, actual hours logged, equipment claimed separately, and no double-claiming of bundled costs. If you have not yet lodged your 2025–26 return, check whether a registered tax agent can still lodge for you on a later date, and make sure your hour log is complete before you claim.
Finally, remember the three conditions that apply to every work-related deduction: you must have spent the money yourself and not been reimbursed, the expense must be directly related to earning your income, and you need a record to prove it. If any of those fails, the deduction fails with it — no matter how many hours you worked from home.
Frequently asked questions
What is the work from home tax deduction rate for 2025–26?
The ATO fixed rate is 70 cents per hour worked from home for 2025–26, the same as 2024–25. Multiply your total hours by 70 cents to get your running-costs deduction.
Can I claim my internet bill on top of the 70-cent rate?
No. The fixed rate already covers internet, phone use, energy and stationery, so you cannot claim those separately. You can claim depreciation on equipment and furniture separately.
Do I need to keep a diary of my hours?
Yes — a record of your actual hours worked from home for the whole income year, kept as you work them. Estimates and four-week representative diaries are not accepted for the fixed rate method.
Can I claim rent or mortgage interest for working from home?
Generally no. Employees cannot claim occupancy costs such as rent, mortgage interest, rates or insurance for a home office, except in narrow circumstances where the home is a genuine place of business.
Is the fixed rate or actual cost method better?
It depends on your bills. The fixed rate suits most workers for its simplicity; the actual cost method can win if your genuine work-related running costs exceed the fixed-rate total. Compare both before choosing, and use one method for the whole year.
What if my employer reimburses my home office costs?
You cannot claim a deduction for costs your employer has reimbursed. You can only claim expenses you paid yourself that were not reimbursed.
Conclusion
For 2025–26, the work-from-home deduction is simple: 70 cents per hour, logged properly, plus equipment depreciation claimed separately. Three days a week from home is worth a $766 deduction and roughly $245 in tax saved at the 30% marginal rate — real money for a log that takes seconds a day to keep. Start the log, keep one bill per expense type, and check your total on the income tax calculator before you lodge. The workers who miss out are rarely those who fail to qualify — they are the ones who never kept the hours record in the first place.