Working from home deductions, 2025-26: fixed rate or actual cost

Two ATO methods can carry a working-from-home claim in a 2025-26 return, and the records you hold decide which one is open to you. The fixed rate is 70c for each hour you worked from home in 2025-26. Actual cost is the work share of what you really spent. The fixed rate needs a record of your actual hours for the whole income year, and the ATO says an estimate of your hours won’t be acceptable.

Searches that say “2026” usually mean the return you lodge in 2026. The ATO labels its instructions for that return “2026”, and they apply to 1 July 2025 to 30 June 2026, the 2025-26 income year. Every figure below belongs to that year unless it is labelled otherwise. The $1,000 standard deduction starts in the 2026-27 income year and does not apply to this return; the section on 2026-27 says what the ATO has published so far.

This guide is for an employee lodging their own return. It does not cover claims made through a business. It rests on ATO pages read in September 2026. InkCairn is an independent site, not the ATO and not a tax agent (see how guides are sourced), so where a step is InkCairn’s reading rather than something the ATO states, the guide says so. It cannot see your circumstances and is not personal tax advice. For when the return is due and what lateness can cost, see the 2025-26 lodgment deadline guide.

Who can claim at all

The ATO sets three conditions for any working-from-home claim, whichever method you use:

1. You work from home to fulfil your employment duties, not just minimal tasks such as occasionally checking emails or taking calls.
2. You incur additional running expenses because you work from home.
3. You have records that show you incurred those expenses, for example receipts.

Three further points from the ATO’s pages:

• Private use is apportioned. Where an expense is for both private and work purposes, you can only claim the work-related portion.
• A fully reimbursed employee can’t use the fixed rate. The ATO’s compliance guideline PCG 2023/1 says that if your employer reimburses you for all your additional running expenses, or incurs them all on your behalf, you don’t meet the condition for the fixed rate.
• An allowance is income. If your employer pays you an allowance to cover working from home expenses, you must include it as income in your tax return.

Where two people in one household work from home, the guideline says each has to meet every requirement on their own. A bill in one person’s name still counts for the other if that person contributes to paying it. Paying board does not count, because the ATO treats those arrangements as generally private.

Fixed rate and actual cost, side by side

Which gives the bigger deduction depends on your own expenses. No ATO page read for this guide says one method is better in general. The ATO offers its home office expenses calculator to work out a deduction, and its 2026 paper return instructions send a reader looking for the method that gives the best deduction to its Working from home expenses page, which describes both methods without ranking them. InkCairn’s suggestion: use the method whose records you already hold, and run both through the ATO’s calculator if you hold the records for both.

One contrast the ATO does draw is about phone use. In its fixed rate example for 2025-26, Keisha’s phone use on days she works in the office is covered by the rate too, so she can’t add it. The ATO’s point is that a reader who wants all of their work phone use claimed, including on office days, has to use the actual cost method.

The fixed rate: 70c per hour for 2025-26

The ATO’s fixed rate page lists 70c per work hour for 2024-25 and 2025-26, and its 2026 return instructions (myTax and paper) both give 70c per hour worked from home for 2025-26. The compliance guideline PCG 2023/1 shows 70c from 1 July 2024 with no end date. These agree for this return.

The calculation is the total number of hours you worked from home during the year multiplied by the rate.

• What the rate includes. Home and mobile internet or data, mobile and home phone usage, electricity and gas for heating, cooling and lighting, and stationery and computer consumables such as printer ink and paper. If you use this method you can’t claim a separate deduction for any of them.
• No dedicated office needed. You don’t need a separate home office or work area to use it.
• Depreciation is not in the rate. The decline in value of a desk, chair or computer you used for work is claimed separately (see the section on equipment).
• Drop the cents; do not round. Add the rate amount, any depreciation and any other expense the rate doesn’t cover. The ATO says the cents are disregarded, not rounded, and the compliance guideline cites section 388-85 of Schedule 1 to the Taxation Administration Act 1953: you include only the whole dollar amount.

Older rates are labelled warnings, not options. They belong to other income years, and none applies to a 2025-26 return. The ATO’s fixed rate page lists 67c for 2022-23 and 2023-24 and 52c for 2020-21 and 2021-22. The 80c “shortcut method” was available only from 1 March 2020 to 30 June 2022, according to the compliance guideline.

Three ATO examples, 2025-26

Wanda’s example is the one to read before you start. She estimated her hours for 1 July 2025 to 28 February 2026 and recorded them only from 1 March 2026. The ATO says she can’t include the estimated hours. InkCairn’s reading of the same rule: if you kept a record for only part of the year, the fixed rate covers only the hours you recorded.

What records each method needs

Fixed rate.

• Hours. A record of the actual hours you worked from home during the entire income year, for example a timesheet, roster, diary or similar document. The compliance guideline says that from 2023-24 the record must be kept at the time, and it lists timesheets, rosters, logs of time spent on employer systems, time-tracking apps and a diary kept at the time.
• Expenses. At least one record for each type of expense the rate includes. The ATO’s example is one quarterly electricity bill and one stationery receipt. The compliance guideline asks for one monthly or quarterly bill for energy, phone and internet. If the bill isn’t in your name, keep additional evidence that you incurred the expense.
• How long. In most cases, 5 years from the date you lodge. Records for a depreciating asset run 5 years from the date of your last claim for its decline in value.

Actual cost.

• Hours. Either a record of your actual hours for the entire income year, such as a timesheet or spreadsheet, or a continuous four-week period that represents your usual pattern of working at home, such as a diary.
• Expenses. The receipts, bills and other documents for the additional running expenses you incurred, and how you worked out the amount of your deduction.

The $300 rule does not remove the fixed rate’s records. For 2025-26 the ATO’s instructions say that if your total claim for all work-related expenses is $300 or less, you need records to show how you calculated your claim, and that above $300 you must have written evidence. That exception ends from 1 July 2026. No ATO page read for this guide says in one sentence whether it relaxes the fixed rate’s own record rules. InkCairn’s reading, not an ATO statement: keep the hours record and one bill per expense type whatever the size of your claim, because those requirements sit in the same instructions with no exception stated.

Actual cost: what the ATO lets you count

The method covers the decline in value of depreciating assets, energy for heating, cooling and lighting, home and mobile phone, data and internet, stationery and computer consumables, and cleaning of a dedicated home office. Where an expense is both private and work, you apportion it on a fair and reasonable basis.

• Same-room test. The ATO says you don’t incur additional running expenses if other members of your household, who aren’t working from home, are in the same room while you work. Heating, cooling and lighting are not an extra cost in that case.
• Energy. The ATO’s method multiplies the cost per unit of power by the average units you use per hour, then by your total annual hours of work-related use. The ATO’s own worked energy example is left out here because its units are inconsistent.
• Phone and internet. If you receive an itemised bill, work out your work-related use over a continuous four-week period and apply it to the year.
• Cleaning. Only for a dedicated home office, apportioned by floor area and by private and household use.
• A device example. If you buy a device for $289 and use it 80% for work, the ATO says you can claim $231 (80% × $289).

Desk, chair, computer and other equipment

Under either method, the ATO’s rule for a desk, chair or computer you use for work turns on what it cost.

• $300 or less. If the item cost $300 or less and you use it mainly to produce non-business income, you can claim an immediate deduction in the year you buy it.
• More than $300. If it cost more than $300, forms part of a set that together cost more than $300, or is identical or substantially identical to other items that together cost more than $300, you claim its decline in value over its effective life.
• Low-value pool. The ATO’s fixed rate page also describes a low-value pool for assets with a cost or opening adjustable value of less than $1,000. This guide does not work through pools.
• Employer-provided items. A laptop or phone your employer provides, or an expense your employer reimburses, is not a deduction.

A wording difference. The ATO’s actual cost page words the $300 test as “mainly for a work-related purpose” and leaves out the identical-items condition. The threshold is the same. This guide follows the fixed rate page’s fuller conditions because they leave you less exposed to a shortfall if the two differ.

What you can’t claim

• Household items. Coffee, tea, milk and other general household items, even if your employer provides them at work.
• Anything your employer provides or reimburses.
• Children’s costs. Costs related to children and their education, including equipment such as iPads and desks.
• Occupancy expenses, in general. The ATO says you generally can’t claim rent, rates, mortgage interest and insurance.

Occupancy is the exception, not the rule, for an employee. The ATO says you can claim it only if all three apply: the nature of your work requires a place of business, your employer doesn’t provide an alternative, and the area you use is exclusively or almost exclusively used for work and isn’t readily capable of being used for anything else. If your employer provides you with a place to work, you can’t claim occupancy even if you are allowed to work from home.

Claiming occupancy has a capital gains tax consequence. If you acquired your home after 20 September 1985 and you are eligible to claim occupancy expenses, the ATO says there are capital gains tax implications for your home. There are none if you only claim running expenses. Occupancy records are kept for the whole time you own the home and for at least 5 years after you sell it. The CGT guide on shares explains what a CGT event is, but it covers shares, not a home.

Where the claim goes in your 2025-26 return

In myTax, at Personalise return choose “You had deductions you want to claim”, then “Work-related expenses”, and use the Other work-related expenses banner. The ATO asks you to include the method in the description, either “Fixed rate” or “Actual cost”. For the fixed rate, enter the dollar amount, not the number of hours. If you use the fixed rate, don’t claim phone or internet expenses again at that section.

On the paper return, the ATO’s 2026 instructions have you add the claim into the question D5 total and write that total at label E. Phone or internet expenses go there only if you have not already claimed them through the fixed rate.

This guide does not estimate what a deduction saves you, because that depends on your other income. The 2025-26 resident rates are in the tax-free threshold guide. Lodgment dates are in the lodgment deadline guide.

2026-27 changes (next year, not this return)

Nothing in this section applies to a 2025-26 return.

• A standard deduction. The ATO says that from the 2026-27 income year, eligible taxpayers are entitled to a standard deduction of up to $1,000 for work-related expenses, without needing to have spent the money or kept records. It first applies in the 2026-27 tax return, and the ATO says it is not available for Tax Time 2025-26.
• It interacts with working from home claims. The ATO says the standard deduction is reduced by certain work-related expenses you claim, including working from home expenses.
• Its legal status. The standard deduction is legislated: the Federal Register of Legislation lists Schedule 4 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 as “Standard deduction for work-related expenses”, and the ATO says it applies from 2026-27. InkCairn did not read the Schedule’s text.
• Record-keeping. From 1 July 2026 the ATO’s $300 record-keeping exception won’t apply.
• Low-value pool. For 2026-27 and later, you can’t add a depreciating asset to a low-value pool if, when you acquired it, you expected to mainly use it to earn assessable labour income.

The ATO’s detail for 2026-27 rests partly on a draft ruling, so expect it to change.

What the ATO has not published

• An average deduction. No ATO page read for this guide states an average working-from-home deduction. The ATO’s worked examples ($590, $945 and $95 above) are illustrations, not averages, and don’t show what is typical.
• A 2026-27 fixed rate. The ATO’s fixed rate page lists rates to 2025-26 only. This guide does not carry 70c forward.

If your position is unclear

InkCairn’s suggestion: ask the ATO or a registered tax agent before you lodge if you have no hours record for part of the year, if your employer reimburses some of your expenses, if the bills you rely on aren’t in your name, if you are thinking of claiming occupancy expenses, or if you and someone else in your household both work from home.

Left out on purpose: an estimate of what a claim saves in tax, claims made through a business, the ATO’s energy example figures, the working of low-value pools, and any 2026-27 rate.