Working From Home Tax Deductions Australia 2026: The Revised Fixed Rate Method Explained

If you worked from home this financial year — even just a few days a week — you are likely entitled to claim a tax deduction for it on your 2025-26 return. The ATO's revised fixed rate method is now set at 70 cents per hour. It requires no dedicated home office space, and can add up to a meaningful deduction come tax time. This guide covers how the 70-cent rate works, what it covers, the record-keeping required, and how it compares to the actual cost method — with real numbers throughout.

What Is the Revised Fixed Rate Method?

The revised fixed rate method is an ATO-approved shortcut for calculating home office running costs. Instead of tracking individual bills and splitting them between work and personal use, you multiply the total hours you worked from home during the year by a fixed hourly rate.

For the 2025-26 income year (1 July 2025 to 30 June 2026), that rate is 70 cents per hour — the same rate that applied in 2024-25. Before that, the rate was 67 cents per hour for 2022-23 and 2023-24. The current 70-cent rate is set out under ATO Practical Compliance Guideline PCG 2023/1.

You do not need a dedicated study or a room used exclusively for work. If you sit at your kitchen table and work, the hours you spend there count. The only requirement is that you genuinely worked from home.

What the 70-Cent Rate Covers

The 70-cent rate is a bundled rate. It already accounts for:

• Electricity and gas (heating, cooling, lighting)
• Internet (home broadband and data)
• Mobile and home phone costs (the work-related portion)
• Stationery and computer consumables (printer ink, paper, USB drives)

Because these costs are bundled into the rate, you cannot claim them separately on top of the 70 cents. If you do, the ATO treats it as double-dipping — this is one of the most common mistakes flagged in ATO compliance reviews.

What the 70-Cent Rate Does NOT Cover

Several significant expenses are not included in the 70-cent rate, meaning you can claim them as separate deductions on top of it.

Depreciation of work-related equipment — if you purchased a desk, ergonomic chair, second monitor, or other home office equipment, you can claim the work-related depreciation on top of the 70-cent rate. Items costing $300 or less with 100% work use can be written off in full immediately. More expensive items are depreciated over their effective life (typically 2–5 years for electronics, 10+ years for furniture).

Occupancy expenses — rent, mortgage interest, land taxes, and insurance are generally only claimable under the actual cost method, and only if you have a dedicated area used exclusively for work. For most employees, these are not available under either method.

Record-Keeping Requirements: What the ATO Now Demands

The ATO tightened record-keeping rules significantly from 1 March 2023 onward. Here is exactly what you need for a valid 2025-26 WFH claim under the fixed rate method:

• A record of every actual hour worked from home for the full income year. This means a contemporaneous log — kept as the hours happen, not reconstructed at tax time. A timesheet, calendar entry, work roster, employer system log, or time-tracking app all qualify. Estimates are not accepted.
• At least one document showing you incurred each type of expense the rate covers. One electricity bill, one internet bill, and one phone bill for the income year. You do not need every bill — just evidence that you paid for these services.
• Receipts for any separately claimed equipment. If you are claiming depreciation on a desk, chair, or computer, keep the purchase receipt and be able to show the work-use percentage.

Keep all records for five years from the date you lodge your return.

Use CalcPhi's free Income Tax Calculator to see exactly how a deduction will reduce your taxable income and final tax bill.

How to Calculate Your WFH Deduction: Step-by-Step

Meet Sarah. Sarah is a marketing manager in Brisbane who works from home three days a week. Over the 2025-26 financial year she works approximately 1,560 hours from home (3 days × 8 hours × 52 weeks = 1,248 hours, plus around 312 hours of evening emails and calls), logged in her Google Calendar each day.

Step 1 — Fixed rate deduction:
1,560 hours × $0.70 = $1,092

Step 2 — Equipment depreciation:
Sarah bought an office chair for $320 (100% work use). ATO effective life for office furniture is 10 years; diminishing value depreciation at 20% = $64 in year one. She also bought a $280 laptop stand — under $300, 100% work use, claimed in full immediately: $280.

Step 3 — Total deduction:
$1,092 + $64 + $280 = $1,436

If Sarah is in the 32.5% tax bracket, this deduction saves her approximately $466 in tax.

Fixed Rate Method vs Actual Cost Method

The fixed rate method is simpler but is not always the better choice. The actual cost method lets you claim the real work-related proportion of every covered expense, but it requires more detailed records and a dedicated work area.

Full-time WFH worker, approximately 1,800 hours per year

Expense	Fixed Rate Method	Actual Cost Method (estimate)
Hours-based claim	1,800 × $0.70 = $1,260	N/A
Electricity (work %)	Included in rate	$600–$900
Internet (work %)	Included in rate	$300–$500
Phone (work %)	Included in rate	$150–$250
Stationery	Included in rate	$100–$200
Total running costs	$1,260	$1,150–$1,850

The actual cost method can come out ahead for high-consumption households, but the record-keeping burden is much higher — you need floor area percentages, all bills, and a justified work-use percentage for each expense.

Use CalcPhi's Salary / Take-Home Pay Calculator to see how your net pay changes once work-from-home deductions reduce your taxable income.

Common Mistakes the ATO Flags

Estimating hours rather than logging them. If you cannot produce a contemporaneous record of actual hours, your claim is vulnerable. Start tracking now if you have not been doing so.

Claiming phone and internet on top of the 70-cent rate. You cannot do this under the fixed rate method — it is one or the other.

Claiming WFH deductions while also claiming occupancy costs. Employees working from home generally cannot claim rent, mortgage interest, or rates as a deduction.

Overclaiming equipment depreciation. A laptop used mostly for personal use cannot be claimed at 90% work use. The ATO expects a reasonable, defensible percentage — 50–70% is defensible for many employees; claiming 100% on shared-use devices is a red flag.

Forgetting to pro-rate part-year claims. If you only worked from home for part of the year, only claim the hours you actually worked from home.

The $1,000 Standard Work Deduction: Not Yet for 2025-26

A proposed $1,000 standard work expense deduction that does not require receipts is real — but it applies from the 2026-27 income year onwards, not 2025-26. For your return lodged in 2026, you still need to use the fixed rate or actual cost method with records. Do not confuse the two.

Quick Reference: 2025-26 WFH Fixed Rate at a Glance

ATO revised fixed rate method — FY 2025-26 summary

Element	Detail
Rate	70 cents per hour
Applies from	1 July 2024
Dedicated office required?	No
Hours log required?	Yes — actual hours, not estimates
What's covered	Electricity, gas, internet, phone, stationery
What's separate	Equipment depreciation, occupancy costs (if eligible)
Record retention	5 years from lodgement
ATO guideline	PCG 2023/1

Frequently Asked Questions

• Can I claim working from home deductions without a dedicated home office?

  Yes. The revised fixed rate method does not require a separate room set aside exclusively for work. You can work from your kitchen table, living room, or any part of your home and still claim the 70 cents per hour rate, as long as you have a record of the actual hours worked.

• What is the 70-cent rate for 2025-26 and what does it include?

  The ATO's revised fixed rate for the 2025-26 income year is 70 cents per working hour spent at home. This single rate covers electricity and gas, home internet, mobile and landline phone costs (the work portion), and stationery and computer consumables. You cannot claim any of these separately on top of the rate.

• Do I need to keep every electricity and internet bill to claim WFH deductions?

  You need at least one bill for each expense type the rate covers — one electricity or gas bill, one internet bill, and one phone bill for the income year. You do not need every monthly or quarterly bill, just enough to demonstrate you actually incurred each category of expense.

• Can I claim my desk or office chair separately from the 70-cent rate?

  Yes. The depreciation of depreciating assets — such as desks, office chairs, monitors, and computers — is not included in the 70-cent rate. You can claim these separately. Items costing $300 or less with 100% work use can be claimed in full immediately; more expensive items are depreciated over their effective life.

• How is the actual cost method different from the fixed rate method?

  The actual cost method lets you claim the real work-related proportion of each expense — electricity, internet, phone — rather than a bundled hourly rate. It can yield a higher deduction for high-usage households, but requires more detailed records, a clear work-use percentage calculation, and typically a dedicated workspace. The fixed rate method is simpler and suits most part-time WFH employees well.

• What records does the ATO require for a WFH claim in 2025-26?

  You need a contemporaneous record of every actual hour worked from home throughout the year — a diary, timesheet, calendar, or app-based log. Estimates are not accepted. You also need at least one bill evidencing each expense type (electricity, internet, phone) and receipts for any separately claimed equipment. Keep all records for five years from lodgement.