Work From Home Tax Deductions in Australia: The 70 Cents Per Hour Rate Explained

Every year I speak to clients who've claimed their work from home expenses and got it wrong - not because they were dishonest, but because the rules are genuinely easy to misread. Either they've claimed the fixed rate and then also claimed their internet bill on top (double-dipping, which the ATO catches), or they've estimated their hours without keeping a record at the time, which is the single most common reason a work from home claim gets disallowed.

So let's go through exactly how this works for the 2025-26 income year.

The two methods the ATO gives you

You have to pick one method for the entire income year - you can't mix and match. The two options are the fixed rate method (70 cents per hour) and the actual cost method. They suit different situations, and the right one depends on how often you work from home and what your actual running costs are.

• Fixed rate method - 70 cents for every hour you work from home. Covers electricity and gas, internet, phone, and stationery. You claim furniture and equipment separately on top.
• Actual cost method - you work out the genuine work-related percentage of every running expense you actually incur. More work, but potentially worth more if you work from home four or five days a week with high running costs.

For most people working from home one to three days a week, the fixed rate is simpler and ends up in roughly the same place. If you're fully remote with a dedicated home office and high electricity costs, it's worth running the numbers on both before you lodge.

What the 70 cents rate actually covers

This is where the double-dipping errors happen. If you use the fixed rate, the 70 cents already covers four categories of running expense: electricity and gas, home and mobile internet, phone usage, and stationery and computer consumables. You cannot claim any of these separately on top - they are already inside the rate.

What you can claim separately, on top of the fixed rate, includes things like furniture, monitors, keyboards, webcams, laptops and computers you purchased yourself, and repairs to work equipment. The rule here is that items costing $300 or less used mainly for work can be deducted in full in the year you bought them. Items over $300 are depreciated over their effective life.

“The fixed rate is 70 cents - but it's not the ceiling. The mistake is assuming you can't claim anything else.— Karuna, Forward Accounting

The record-keeping rule most people get wrong

The ATO tightened this a few years ago and it has stayed tight. Estimated hours are not accepted. You need a record that was made at or around the time you actually worked - not something reconstructed later from memory. A timesheet, a roster, a diary, a calendar entry, or a spreadsheet you update as you go all qualify. A rough tally you wrote down in October covering the previous 12 months does not.

You also need at least one document showing you actually incurred each of the four expense categories the fixed rate covers - for example, one quarterly electricity bill and one internet bill. You don't need every single bill, just evidence the expense was real.

Common mistakes that attract ATO attention

• Estimating hours rather than recording them at the time
• Claiming internet or electricity separately while also using the fixed rate
• Claiming 100% work use on items that are clearly shared (a household internet plan, for example)
• Claiming rent or mortgage interest - employees almost never qualify for these, and incorrectly claiming occupancy costs can create capital gains tax complications when you sell
• Switching between the fixed rate and actual cost method partway through the year

How to calculate your fixed rate deduction

Multiply your total work-from-home hours for the income year by 70 cents. If you work two days a week from home, eight hours a day, for 48 weeks, that's 768 hours - which gives you $537.60 before you add anything for depreciating assets.

Then add any depreciating assets. If you bought a desk for $280 (under $300, so deductible in full) and a monitor for $450 (over $300, depreciated over four years, so roughly $112.50 for a full year of ownership), your total claim would be $537.60 + $280 + $112.50 = $930.10. If you bought the monitor partway through the year, the depreciation is apportioned to the days you owned it.

When the actual cost method wins

If you're working from home four or more days a week with genuinely high running costs - a dedicated room with a large electricity draw, for example - the actual cost method can produce a larger deduction. The record-keeping burden is heavier (you need receipts and bills for every expense claimed, plus a record of hours or a four-week representative diary), so it's worth the effort only if the numbers actually stack up in your favour.

If you're unsure which method gives you more, bring both sets of records to your accountant and run it both ways before you commit to one. Once you've lodged using one method, that's the method for that income year.

Key takeaways for 2025-26

• The fixed rate is 70 cents per work-from-home hour - unchanged from 2024-25
• Records must be made at the time, not reconstructed later
• The fixed rate covers electricity, internet, phone and stationery - don't also claim these separately
• Furniture and equipment are claimed on top, not inside the 70 cents
• Items under $300 used mainly for work are deductible in full; over $300, depreciate over effective life
• Keep everything for five years from the date you lodge

If you've been winging your work from home claim or aren't sure whether you're leaving money on the table, it's worth getting a registered tax agent to review it before you lodge. The ATO's focus on contemporaneous records isn't going away, and getting this right upfront is a lot easier than dealing with an audit later.