Work from home deductions for 2025⁠–⁠26: which method suits you

If you worked from home for your job at any point in 2025⁠–⁠26, this guide explains how work from home deductions work and how to choose between the ATO's two methods. You'll see what each method covers, the records the ATO expects, what you can and can't claim, and what changes from 1 July 2026.

Can you claim work from home deductions?

You may be able to claim if all of these apply:

• you worked from home to fulfil your employment duties, not just minimal tasks such as occasionally checking emails or taking calls
• you incurred additional running expenses because you worked from home, such as higher electricity or internet costs
• your employer didn't reimburse you for those costs
• you have the records the ATO requires.

Sole traders and people running a business from home work under different rules. If that's you, see our page on tax for sole traders and contractors.

Fixed rate or actual cost: the two methods at a glance

For 2025⁠–⁠26 you can use either the fixed rate method or the actual cost method.

Which method suits you?

• The fixed rate usually suits people who work from home regularly, have fairly ordinary running costs, and would rather keep a timesheet than analyse bills.
• The actual cost method may be worth the extra effort if you heat or cool a separate room for long hours or use your phone and internet heavily for work, and you're prepared to keep detailed records.
• Either way, the method has to match the records you kept. If you didn't record your hours for the whole of 2025⁠–⁠26, the fixed rate may not be available to you.

The fixed rate method

Under the fixed rate method, you multiply the hours you worked from home by 70 cents. The rate covers the additional running expenses for:

• electricity and gas for heating, cooling and lighting
• internet and data
• mobile and home phone use
• stationery and computer consumables, such as printer ink and paper.

Because the rate already covers these costs, you can't claim any of them separately as well.

Records for the fixed rate method

The ATO's record-keeping rules for this method are strict:

• Hours: a record of the actual hours you worked from home across the entire income year, such as a timesheet, roster, diary or similar document. An estimate isn't acceptable.
• Expenses: at least one record for each type of expense the rate covers. For example, if you had electricity and phone costs, keep one quarterly electricity bill and one phone bill.

Example: the fixed rate method

Example: Sam, an employee who lives in Mona Vale, worked from home three days a week, eight hours a day, for 45 weeks of 2025⁠–⁠26, and recorded those hours in a timesheet.

• Hours worked from home: 3 × 8 × 45 = 1,080 hours
• Fixed rate deduction: 1,080 × $0.70 = $756

Sam may also be able to claim the work-related decline in value of a laptop and desk separately (see below).

The actual cost method

The actual cost method lets you claim the actual work-related portion of your running expenses, worked out on a reasonable basis. It takes more effort, but it can suit people whose costs are higher than the fixed rate reflects, such as someone heating or cooling a separate home office for long hours.

Typical calculations include:

• Energy: the power your equipment uses per hour, multiplied by your electricity price and the hours you worked.
• Phone and internet: your work-use percentage from a representative four-week period of itemised bills, applied across the year.
• Stationery and consumables: the work-related share of what you bought.
• Cleaning: if you have a room set aside as a dedicated home office, a floor-area share of cleaning costs, reduced for any private use.

Records for the actual cost method

You need a record of the hours you worked from home. That can be your actual hours for the year, or a diary covering a continuous four-week period that represents your usual pattern. If your pattern changes, you need a new record. You also need bills and receipts for each expense, and a record of how you worked out the work-related share.

Example: the actual cost method

Example: using the same 1,080 hours, suppose Sam's records show the following.

In this example the actual cost method gives a larger deduction than the fixed rate ($948 compared with $756), but only because Sam kept the bills, a four-week usage diary and the calculations to back it up. The figures are illustrative. Your result depends on your own costs and records, and for many people the fixed rate is close enough to be the practical choice.

What you can claim separately under either method

Whichever method you use, you may also be able to claim:

• Equipment and furniture you use for work, such as a desk, chair, computer, monitor or bookshelves. Items costing more than $300 are claimed over their effective life; the ATO's effective life for a laptop is two years. An item costing $300 or less may be claimed outright if you use it mainly for work and it isn't part of a set costing more than $300.
• Repairs to that equipment and furniture.
• Cleaning a dedicated home office, in limited circumstances.

In each case you claim only the work-related share.

Example: you buy a $2,000 laptop on 1 July 2025 and use it 60% for work. Using the prime cost method over two years, its decline in value for 2025⁠–⁠26 is $1,000, so your deduction is 60% of that, or $600.

What you generally can't claim

• Occupancy expenses. Rent, mortgage interest, council and water rates, land taxes and house insurance are generally not deductible for employees. The narrow exception is where part of your home has the character of a place of business, your employer doesn't provide another place to work, and the area is used exclusively or almost exclusively for work. Choosing to work from home when an office is available doesn't qualify, even if you live a long way from it.
• General household items such as coffee, tea and milk, even if your employer supplies them at the office.
• Costs your employer reimburses, or equipment your employer provides.
• Double claims. If you use the fixed rate, you can't also claim the energy, phone, internet or stationery costs it covers.

Record-keeping tips that save time

• Keep a simple timesheet or calendar of the hours you work from home as you go, rather than reconstructing it at tax time.
• Photograph receipts and bills. The ATO accepts clear digital copies, and the myDeductions tool in the ATO app can store them.
• Note the work-use percentage of equipment when you buy it, and review it if your job changes.
• Keep your records for five years from the date you lodge.

Looking ahead: the $1,000 standard deduction from 2026⁠–⁠27

From the 2026⁠–⁠27 income year, eligible taxpayers can claim a standard deduction for work-related expenses without keeping receipts. It doesn't apply to 2025⁠–⁠26 returns.

Based on the ATO's guidance:

• It's available to Australian residents for tax purposes who earn labour income, such as salary and wages, and is capped at the lower of $1,000 and your total labour income.
• Work from home expenses, work-related car expenses and the decline in value of equipment used to earn labour income all reduce the standard deduction dollar for dollar.
• If you claim more than your maximum standard deduction, you'll need written evidence for all the work-related expenses you claim. The old $300 exception no longer applies from 2026⁠–⁠27.

What this means for you: if your work from home and other work-related costs are well under $1,000, the standard deduction may be the simpler option. If they're higher, keep recording your hours and receipts from 1 July 2026 so you have the choice at tax time. A tax planning conversation can help you work out which way to go.

How Jan can help

Jan can review your hours and expense records, compare the two methods and prepare your 2025⁠–⁠26 return using the claim your records support. If you're still gathering paperwork, start with our tax return checklist, then book a free intro call.