Working From Home Tax Deductions: Fixed Rate or Actual Cost?

For the 2025–26 income year, the ATO's fixed rate method lets you claim 70 cents for every hour you worked from home, covering energy, internet, phone and stationery in one figure. The actual cost method usually pays more only when you have a dedicated work room, long weeks at home and above-average bills, and the records to prove each one. If you share a desk or work from home a couple of days a week, the fixed rate is normally the bigger, simpler claim.

That is the short answer. Below, Fin runs three household profiles through both methods with real illustrative numbers, shows where the crossover sits, and covers the change that arrives with the 2026–27 return.

Key takeaways

• Fixed rate, 2025–26: 70c per work hour (the same rate as 2024–25), as at November 2026. It covers energy, home and mobile internet, phone and stationery.
• Actual cost: the work share of what you really spent, worked out on a fair and reasonable basis, with bills and a usage record behind every figure.
• Equipment sits outside both: desks, chairs, monitors and laptops are claimed separately under either method, as decline in value or (at $300 or less) immediately.
• Hours must be recorded as you work. The ATO says an estimate of your hours won't be acceptable for the fixed rate.
• From 2026–27, most employees get an automatic standard deduction of up to $1,000 for work-related expenses, and a working from home claim reduces it dollar for dollar.

Which income year are you claiming?

As at November 2026, most people are finishing their 2025–26 return. If you lodge yourself through myTax, the usual deadline was 31 October 2026; if you use a registered tax agent, you may be on their lodgment program with a later date. Either way, the 2025–26 rules and the 70c rate apply to the hours you worked between 1 July 2025 and 30 June 2026.

The 2026–27 year is the one you are living through now. Its records start from 1 July 2026, and its rules change (see the 2026–27 section below). The ATO's fixed rate page, last updated June 2026, lists rates up to 2025–26 only, so check it for the 2026–27 rate before you lodge next year.

The fixed rate method: one rate, one hours record

You multiply the hours you worked from home by the rate for the year:

Deduction = total hours worked from home × 70c (2025–26)

The rate covers the additional running costs of:

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

Because the rate already includes these, you can't claim any of them again separately, even phone use on days you are in the office. What you can add on top:

• the decline in value of equipment and furniture you use for work, such as a desk, chair, monitor or laptop
• repairs to those items
• items costing $300 or less used mainly for work, claimed in full in the year you buy them

Records you need: a record of the actual hours you worked from home for the whole year (a timesheet, roster, diary or calendar entries kept at the time), plus at least one bill or receipt for each running expense the rate covers. One quarterly electricity bill and one monthly internet bill is enough. Keep them for five years from lodgment.

The actual cost method: the work share of real bills

Here you calculate what working from home actually added to each bill:

• Energy: the ATO's approach is appliance power (kW) × your cost per kWh × the hours you used it for work. A 1.09 kW air conditioner at 28c per kWh costs about 30.5c an hour to run.
• Internet and phone: work out your work-related use over a representative four-week period and apply that percentage to the year.
• Stationery and consumables: from receipts, apportioned if used privately too.
• Cleaning of a dedicated home office, apportioned by floor area.
• Decline in value of equipment, the same as under the fixed rate.

One rule catches many people: if other members of your household (who are not working from home) are in the same room while you work, you are not incurring additional lighting, heating or cooling, so there is no energy claim for that room.

Records you need: either an hours record for the full year or a four-week diary that represents your usual pattern, plus the bills, receipts and the calculation behind each figure.

Worked comparison: three households, both methods

All three profiles are illustrative, using the 2025–26 fixed rate of 70c and round, realistic bill amounts. Each assumes 46 working weeks and an 8-hour day. Equipment is left out of the comparison because it is claimed the same way under both methods.

Profile 1: kitchen table, two days a week

Sam works from the kitchen table on Mondays and Fridays while the household goes about its day.

• Hours: 8 × 2 days × 46 weeks = 736 hours
• Internet: $80 a month ($960 a year), 25% work use over a four-week diary
• Phone: $50 a month ($600 a year), 20% work use
• Energy: no additional cost, because the room is in use by the family anyway
• Stationery: $30

Reading: the fixed rate wins by $125, with far less paperwork. In a shared room with average bills, there is little extra cost for the actual method to capture.

Profile 2: spare room, three days a week

Alex works from a spare room three days a week and runs a 1.2 kW air conditioner for about half of those hours.

• Hours: 8 × 3 days × 46 weeks = 1,104 hours
• Cooling and heating: 1.2 kW × 30c per kWh = 36c an hour × 552 hours = $198.72
• Lights, monitor and laptop: 0.15 kW × 30c = 4.5c an hour × 1,104 hours = $49.68
• Internet: $960 a year × 40% = $384.00
• Phone: $600 a year × 25% = $150.00
• Stationery and ink: $60.00

Reading: this is the crossover. Actual cost is ahead by about $70, which is worth roughly $22 in tax at a 32% marginal rate (30% plus the 2% Medicare levy). Whether that is worth a four-week diary and a kWh calculation is your call.

Profile 3: dedicated office, full time, higher bills

Jordan works from a dedicated office five days a week, with a 1.5 kW reverse-cycle unit running all day, a premium internet plan and heavy phone use.

• Hours: 8 × 5 days × 46 weeks = 1,840 hours
• Cooling and heating: 1.5 kW × 32c per kWh = 48c an hour × 1,840 hours = $883.20
• Lights and equipment: 0.2 kW × 32c = 6.4c an hour × 1,840 hours = $117.76
• Internet: $110 a month ($1,320 a year) × 70% = $924.00
• Phone: $70 a month ($840 a year) × 40% = $336.00
• Stationery and ink: $150.00

Reading: actual cost is ahead by about $1,120, worth roughly $360 in tax at a 32% marginal rate. The fixed rate ignores how much power and data you use; the actual method follows your bills, so the gap widens as they rise.

ATO rule worth knowing: the deduction is the total with the cents disregarded, not rounded, which is why $515.20 becomes $515.

Where the crossover sits

Two inputs decide almost every result:

1. Your hours. They drive the fixed rate entirely and the energy line of the actual method.
2. The size of the bills you are apportioning, especially heating and cooling a room nobody else is using.

A practical test before you calculate anything:

• Shared room, average bills, part-time at home: the fixed rate usually wins.
• Dedicated room, average bills, three or so days a week: the two land close, so pick the one your records support.
• Dedicated room, full-time, heavy heating or cooling and a premium plan: actual cost tends to pull clearly ahead.

You choose a method each income year, so a switch next year is always open. Run your own figures through the ATO's home office expenses calculator, or start with the deduction finder to see what else your job lets you claim.

What changes from 2026–27: the $1,000 standard deduction

From the 2026–27 income year, eligible Australian residents who earn salary or wages receive a standard deduction of up to $1,000 for work-related expenses, applied automatically, with no receipts needed. It doesn't apply to 2025–26 returns.

The catch for this comparison: working from home expenses reduce the standard deduction dollar for dollar. So the question becomes whether your total work-related claims beat $1,000.

• Profile 1 would claim $515 of working from home costs. Unless other work expenses lift the total above $1,000, taking the automatic $1,000 instead is simpler and larger.
• Profile 2 sits close to the line, so add up every work expense before deciding.
• Profile 3, at $2,410 for working from home alone, is well above $1,000: claim the full amount and keep the records.

Two more changes apply from 1 July 2026 to everyone: the $300 no-receipt exception for work-related expenses no longer applies, and a depreciating asset you mainly use to earn salary or wages can no longer go into a low-value pool. Union fees and professional memberships sit outside the standard deduction and are still claimed separately.

Record-keeping: what you need by 30 June

Whichever method you pick, the record matters as much as the arithmetic. Without it, the ATO can reduce or refuse the claim.

• Hours, kept at the time: a timesheet, roster, diary or calendar entry for each day at home. Reconstructing them in July doesn't count.
• Fixed rate: one bill or receipt for each type of running expense the rate covers.
• Actual cost: every bill and receipt, the four-week usage diary for phone and internet, and the working behind each percentage.
• Equipment: receipts from the day you buy it and a note of how much you use it for work.

2Fin keeps that file together as the year goes. Bank-feed transactions are categorised as they land and tagged work, business or personal, with receipts matched to each one (how Fin decides, row by row). Enter your yearly hours total from your timesheet and 2Fin's working from home view shows the fixed rate and actual cost methods side by side (Australia). For equipment, the free depreciation calculator works out the decline in value, and the ATO myDeductions-layout export suggests a myTax return line for each work expense. You, or your tax agent, lodge with figures that are already sorted. If you only want a receipt log, it also helps to know when myDeductions on its own is enough.

Your next step

Pull your 2025–26 hours record and one bill for each running cost, then run the fixed rate: hours × 70c. If you have a dedicated room and bills above the levels in Profile 2, run the actual cost method too and claim the one your records prove. Then start this year's hours record now, so the 2026–27 choice between your actual claim and the $1,000 standard deduction is an easy one.

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General information for Australia, not personal tax advice. Check your own situation with the ATO or a registered tax agent.