Working From Home Deduction 2026: Fixed Rate (70c/hr) vs Actual Cost — Which Gives You More?

If you worked from home at any point in the 2025-26 financial year, you can claim a tax deduction. The ATO gives you two methods:

1. Fixed-rate method — a flat 70 cents per hour covering electricity, gas, internet, phone, and stationery. Simple, but you can't also claim these items separately.
2. Actual-cost method — work out the real work-related portion of each bill. More paperwork, but usually gives a bigger refund if you've got a dedicated home office and run heavy equipment (multiple screens, gaming-grade laptop, air-con).

For most hybrid workers doing 2–3 days a week from home, the fixed rate wins on effort-adjusted basis. For full-time WFH workers with a dedicated home office and high energy bills, the actual-cost method typically pays an extra $200–$600 a year.

Authoritative source: ATO — Working from home expenses and PCG 2023/1 — ATO fixed rate method.

You can claim if all three apply in 2025-26:

• You worked from home to fulfil your employment duties — not just casually answering emails.
• You personally incurred additional running costs as a result.
• You have records showing the hours worked and the expenses.

You cannot claim:

• Coffee, tea, milk, or other general household items — even if you'd go through them faster while working.
• The mortgage interest, rent, rates, or insurance on your home (unless you run a genuine business from home — employees can't claim these).
• Hours your employer paid you for but you didn't actually work.
• Time spent on personal activity (lunch break, school drop-off, personal browsing).

If you have no dedicated workspace — you work from the couch or the dining table — you can still use the fixed-rate method, but the actual-cost method gets harder to justify.

The fixed-rate method lets you claim a flat 70 cents for every hour you work from home. That rate covers:

• Electricity and gas for heating, cooling, and lighting
• Home and mobile internet
• Home and mobile phone usage
• Stationery and computer consumables (printer paper, ink, toner)

It does not include: the depreciation on your laptop/monitor/desk/chair, repairs to equipment, or cleaning costs. Those you can claim separately on top of the 70c rate — that's the key trap most guides miss.

Records you need:

• A timesheet, diary, or roster covering the full financial year. Representative 4-week samples are no longer acceptable — the ATO requires a record of the actual hours worked from home for the whole year.
• At least one bill per expense type the 70c rate covers, as evidence the costs were incurred.

Worked example — Sarah, hybrid 3 days/week:
Sarah works 3 days from home × 8 hours × 48 weeks = 1,152 hours. Fixed-rate deduction = 1,152 × $0.70 = $806.40. She also claims $180 depreciation on her monitor and $95 on an ergonomic chair (over their useful life), bringing the total to $1,081.40.

At a 32.5% marginal tax rate, that's roughly $352 back at tax time.

With the actual-cost method you work out the real work-related portion of every running cost. It's more work, but if you've got real infrastructure at home (dedicated office, multiple monitors, high-spec kit, high-wattage HVAC), you'll often come out materially ahead.

What you can include:

• Electricity and gas — for heating/cooling the room you work in, and running your equipment. Calculated based on the wattage of your devices × hours used × cost per kWh, plus the floor-area percentage of your home used for work.
• Internet — the work-related % of your monthly plan, based on time or data split.
• Phone — the work-related % of your bill, based on a 4-week call/data log.
• Stationery, printer ink, paper — 100% if used only for work.
• Depreciation on home office equipment — laptop, monitor, desk, chair, printer, webcam, headset. Items costing $300 or less can be fully deducted in the year of purchase.
• Repairs and cleaning on your home office space.

Worked example — Jake, full-time WFH software developer:

• Electricity (dedicated office, 15% of floor area, high HVAC use): $520
• Internet (80% work-related of $100/month plan): $960
• Phone (60% work-related of $60/month plan): $432
• Depreciation (second monitor, standing desk, ergonomic chair over effective life): $385
• Stationery, consumables: $120

Total actual-cost deduction: $2,417. At a 37% marginal rate, that's $894 back. Under the fixed rate Jake would have claimed 1,920 hours × $0.70 = $1,344 + $385 depreciation = $1,729 — around $255 less.

Records you need: every bill for the claimed period, a 4-week representative diary of work vs personal use for phone and internet, photos/notes of the work area and equipment, a depreciation schedule for each asset, and any repair receipts.

Rough rule of thumb based on ATO data and common scenarios:

• Use the fixed rate if: you work from home less than 3 days a week, don't have a dedicated office space, and your equipment is a basic laptop. The admin burden of the actual-cost method will outweigh the extra $50–$150 you might claim.
• Use the actual-cost method if: you work from home 4+ days a week, you have a dedicated room, your energy bills jumped after going remote, or you've bought substantial home-office equipment in the last 4 years. The extra paperwork usually pays $200–$800 more.
• Run both calculations if in doubt. The ATO lets you pick whichever method gives the bigger deduction each year. Some years will favour fixed, others actual.

You can't use both methods for the same expenses in the same year — but you can switch methods year-to-year.

Of the WFH deduction claims the ATO reviews, the most frequent problems are:

1. Representative diary only. From 1 March 2023 onwards (PCG 2023/1), the ATO stopped accepting a 4-week representative sample for the fixed-rate method. You need a log of the actual hours for the whole financial year.
2. Double-dipping. Claiming the 70c fixed rate and also claiming separate internet or phone expenses — not allowed. The 70c covers those already.
3. Claiming occupancy costs. Employees can't deduct rent, mortgage interest, council rates, or home insurance. Only small-business owners running a genuine business from home can, and even then only for the business-use portion.
4. Inflating work-related %. Claiming 100% of your internet plan when you've got streaming, gaming, and a family on the same line. Keep a 4-week usage log to back up your split.
5. Claiming equipment fully in year 1 when it cost over $300. Anything over the $300 threshold must be depreciated across its effective life (laptops 2 years, desks 20 years, monitors 4 years per ATO effective life tables).

If your WFH claim is high compared to your income, expect the ATO's data-matching systems to flag it. Keep every receipt, every bill, and every hour record for five years after the return is lodged.

If your employer pays a home-office allowance, covers your internet bill, or provides equipment, you can't claim a deduction for the same expense. The deduction is only available for costs you incurred and were not reimbursed for.

If your employer gives you a device (laptop, phone) for work use and you use it for some personal use, you don't need to do anything — there's no taxable benefit to you for ancillary personal use of a work device (ATO guidance on portable electronic devices FBT exemption).

If your employer pays a cash allowance (e.g. $25/week WFH allowance), that allowance is usually assessable income — it goes in your tax return — and you can still claim the actual WFH deduction to offset it. You'll need payslip evidence of the allowance and records of the expense.

Can I claim WFH if I was only WFH for part of the year?
Yes. The fixed rate applies hour-by-hour, so you only claim for the hours you actually worked from home. Keep the diary entries for that period.

Does the 70c rate cover my coffee, water, or snacks?
No. Those are private expenses — the ATO doesn't allow deductions for them under either method.

Can I claim a portion of my rent?
Not as an employee. Occupancy expenses (rent, mortgage interest, rates, insurance) are only deductible if you're running a business from home and the space is used exclusively and regularly for that business.

What if I share the house with a partner who also works from home?
Each person claims separately based on the hours they worked from home. You can't both claim the full 70c for the same hour.

Do I need a dedicated room to claim?
For the fixed rate — no. For actual-cost, a dedicated room makes the floor-area % calculation straightforward and the claim more defensible. Without one, you can still claim, but expect to justify the split more carefully.