Working from home in Australia: fixed rate or actual cost — which claims more?

The fixed rate: one rate, and one record you cannot skip

The fixed rate is 70 cents for each hour you work from home in 2025–26. It covers four kinds of running cost, which you then cannot claim separately: energy for heating, cooling and lighting; home and mobile internet or data; mobile and home phone use; and stationery and computer consumables.

On top of the rate you can still claim the decline in value of equipment and furniture you use for work — a laptop, a desk, a chair — and repairs to them. Cleaning a room you use only for work is not in the rate either, so it stays claimable.

The record is what catches people out. You need a record of the actual hours you worked from home across the whole year, kept as you go: a timesheet, a roster or a diary. An estimate, or a sample month scaled up, is not accepted for this method. You also need at least one bill or receipt for each kind of cost the rate covers — one electricity bill, one internet bill — to show you paid it.

Actual cost: every bill, at its work share

With the actual cost method you work out the real extra cost of working from home, one expense at a time, and claim the work share of each. Energy for a room set aside only for work can be shared by floor area; for a room you also live in, work out the cost of running what you use for work, such as a heater or a light, for the hours you use it. Phone and internet use a work share, usually from a diary of a representative four-week period. Stationery, consumables, cleaning of a dedicated work area and the decline in value of equipment are claimed at their work share too.

The records are heavier: every bill and receipt for the costs you claim, and how you worked out each work share.

Two worked examples

Two days a week at a desk in the living room, about seven and a half hours each day, for 46 working weeks: 690 hours. The fixed rate gives 690 × $0.70 = $483. On actual costs, say the work share of energy comes to $160, internet to $180 (30% of a $600 bill) and phone to $120 (20% of $600): $460, with more records to keep. The fixed rate wins.

Four days a week in a study used only for work, the same hours: 1,380 hours, so $966 on the fixed rate, plus $180 for cleaning the study (12% of $1,500), which the rate does not cover: $1146. On actual costs: energy at 12% of the floor area of a $3,000 bill is $360, internet at 50% of $900 is $450, phone at 30% of $720 is $216, and cleaning is the same $180: $1,206. Actual costs win, narrowly — and only with the records to back them.

These figures are illustrative. Your own answer depends on your hours, your bills and how much of each you use for work; the decline in value of a laptop or a desk is claimed separately under either method.

Which one to choose

The fixed rate suits most people who work from home part of the week: one multiplication, provided the hours record is complete. Actual costs suit someone at home most days in a dedicated room, or with unusually large energy or internet bills, who is willing to keep every bill and work out each share.

You can choose the method each income year. What you cannot do is claim the fixed rate and then claim the costs it already covers — energy, internet, phone, stationery — again on top.

Rent, interest and your home when you sell

Rent, mortgage interest, council rates and home insurance are occupancy costs, and an employee generally cannot claim them for working from home. The exception is narrow: the area has to be a genuine place of business that your employer gives you no alternative to.

Running costs — whichever method you use — have no effect on your main residence exemption. Occupancy costs for a place of business do. How that line is drawn, with the home office CGT calculator to weigh deductions now against tax on the sale.

Where the claim goes on your return

As an employee, working from home is claimed at D5, Other work-related expenses. A sole trader claims it as a business expense. With a job and a business run from the same home, split the hours between them: the job’s share goes to D5 and the business’s share is a business expense, each worked out the same way.