Working from home deductions: what you can claim
Working from home is now a permanent part of life for many Australian employees, and the ATO is paying close attention to the deductions people claim for it. If you’re lodging your 2025-26 return, here is how the rules work and where claims go wrong.
Who can claim
You can only claim working from home costs if you’re actually working from home, you paid for the expense yourself, and it’s directly connected to earning your income. You also need records to prove it. Anything your employer reimbursed can’t be claimed again. If an expense has both private and work use, you can only claim the work portion.
Two ways to claim running costs
1. Fixed rate method (70 cents per hour)
For 2024-25 and 2025-26, the fixed rate is 70 cents per work hour. You multiply your total hours worked from home by the rate. For example, 843 hours at 70c gives a deduction of $590.
The rate covers running costs such as energy, phone and internet. To claim this method, you don’t need a dedicated home office space. The rate also covers stationery and computer consumables such as printer cartridges.
What you can still claim separately is the work-related portion of depreciating assets such as a laptop, monitor, desk or chair, plus repairs and maintenance on them. The fixed rate doesn’t cover depreciating assets.
2. Actual cost method
Here you work out the real work-related share of each expense, such as electricity, gas, internet, phone, stationery, and cleaning of a dedicated work area. This can produce a larger deduction if your costs are high or you have a dedicated study, but it takes more calculation and more paperwork. It usually requires more record-keeping, but may produce a bigger deduction if your running costs are higher.
Which method is better?
Fixed rate is simpler and suits most people. Actual cost may suit you if you:
- Have a dedicated home office with high heating, cooling or electricity use
- Have a large, easily proven work-related internet and phone bill
- Are happy to keep a full set of bills and calculations
We can run both numbers for you and lodge whichever gives you the better outcome.
Records Required
For the fixed rate method, you need a record of the hours you worked from home, such as a timesheet, roster, diary or calendar. You also need evidence you incurred the expenses the rate covers. For example, if you use your phone and electricity while working from home, you need one bill for each of those expenses.
If you didn’t keep hours for part of the year, you can only claim for the period you recorded and worked from home.
For the actual cost method, you need receipts or bills for each item you claim, and a reasonable way to show how you split private and work use.
Equipment and the $300 rule
Items costing $300 or less that you use mainly for work can generally be deducted in full in the year you buy them. Items over $300 are normally depreciated over their effective life. Keep invoices, and note the date you bought each item and how much you use it for work.
What you generally can’t claim
- Rent, mortgage interest, rates and home insurance. These “occupancy costs” are generally only deductible if part of your home is a genuine place of business, which is rare for employees. Claiming them can also affect your main residence CGT exemption.
- Travel between home and your regular workplace
- Expenses your employer paid for or reimbursed
- Private use, such as streaming, personal calls or household bills
- The 70c rate together with separate claims for the same expenses it already covers. This double-dipping is one of the most common mistakes.
Common mistakes that attract ATO attention
- Claiming a round number of hours with no records
- Claiming the same expense under both methods
- Claiming for days spent in the office
- Copying last year’s claim without checking it against this year’s hours
- Claiming a large amount of equipment with no invoices, or at full cost when part of the use was private
Looking ahead to 2026-27
Start keeping your hours record from 1 July 2026. A simple spreadsheet or calendar is enough, as long as it shows the hours actually worked from home.
We can review your records, work out which method gives the better result, and make sure what you claim is supportable if the ATO asks questions. Contact us at STS Accounting team if you have any questions about home office deductions.
