Working From Home Tax Deductions: The Complete 2025–26 Guide

Updated for the 2025–26 income year, with 2026–27 changes noted. Reviewed 19 October 2026.

Most employees who do some work at home can claim a deduction. The rules for 2025–26 are simple once you choose a method: the 70 cents per hour fixed rate, or the actual cost method. This guide explains both, the records you need, what neither covers, and how the new $1,000 standard deduction changes things from 2026–27.

Who can claim

• You must be working from home to fulfil your employment duties, not just doing minor tasks such as checking emails or taking an occasional call.
• You must have incurred additional running expenses (energy, phone, internet, stationery, depreciation) as a result of working from home.
• You must have records. Working from home doesn't require a dedicated home office room for running expenses.

Method 1: fixed rate (70c per hour)

For 2024–25 and 2025–26 the rate is 70 cents for every hour you work from home. It covers energy, phone (mobile and home), internet, stationery and computer consumables. You can't claim those items separately.

On top of the rate you can separately claim the decline in value of equipment and furniture you use for work (desk, chair, monitor, laptop), repairs to them, and cleaning of a dedicated work room. Items costing $300 or less that you use mainly for work can be claimed immediately.

Records: a record of the actual hours you worked from home for the whole year (timesheets, a roster, a diary or a spreadsheet kept as you go); one bill for each running expense covered by the rate (for example, one electricity bill and one phone bill); and receipts for anything you claim separately. Estimates or a sample period aren't accepted for this method.

Method 2: actual cost method

You claim the actual additional cost of each running expense, worked out on a reasonable basis: for example, the energy use of your equipment and the heating or cooling of your work area for the hours you worked there, and the work percentage of your phone and internet.

Records: either the actual hours for the whole year, or a diary of a continuous 4-week period that represents your usual pattern; receipts and bills for each expense; and calculations showing the work-related portion. For itemised phone and internet bills, a 4-week representative period can set the work percentage for the year.

Occupancy expenses (rent, mortgage interest, rates)

Employees generally can't claim these. You can only claim them where your employer doesn't provide a workplace, so you must work from home, and the area is used exclusively or almost exclusively for work (it has the character of a place of business). If that applies, claims are usually based on floor area, and it can affect your main residence CGT exemption.

What you can't claim

• Coffee, tea, toilet paper and other household items.
• Items your employer provided or reimbursed.
• Costs for children's online learning or household members' use.
• Phone, internet or energy separately if you use the fixed rate.
• Additional running expenses when you work in a shared room that household members not working are using at the same time.

2026–27: the $1,000 standard deduction

From the 2026–27 income year, eligible employees automatically get a standard deduction of up to $1,000 for work-related expenses. Working from home expenses you claim reduce the standard deduction dollar for dollar. So if your total covered work expenses are under $1,000, it is usually simpler not to claim them and accept the standard deduction. If they are over $1,000, claim the actual amounts with records.

Worked example

Example (illustrative figures only – not real client data): Ana works from home 2 days a week (7.5 hours a day) for 46 weeks and keeps a timesheet. She bought her own desk and monitor in a previous year.

Under the actual cost method she would need to calculate energy, phone and internet costs separately. She chooses whichever gives the better result and keeps records for that method.

2026–27 comparison: only $853 of these expenses reduce the standard deduction. On similar figures in 2026–27, it would usually be simpler to accept the automatic $1,000 standard deduction and not claim those items.

Checklist

• Choose a method and keep the right records from 1 July.
• Log hours as you go: a calendar entry or timesheet is fine.
• Keep one bill for each type of running expense if using the fixed rate.
• List equipment with purchase date, cost and work-use percentage.

Common mistakes to avoid

• Estimating hours at tax time.
• Claiming phone or internet on top of the fixed rate.
• Claiming rent or mortgage interest as an employee without meeting the strict test.
• Claiming laptops or phones your employer supplied.

Record-keeping tips

• Keep records for 5 years from when you lodge.
• Use the ATO app's myDeductions tool or a spreadsheet for hours.
• Keep depreciation workings for assets until 5 years after the last claim.

When to see an accountant

Get personal advice from a registered tax agent if:

• you're considering claiming occupancy expenses;
• you run a business from home as well as working as an employee;
• you have an ABN, side business or rental property as well as your job;
• you have received an ATO letter, review or amended assessment.

Related guides

• Home office costs (summary)
• Home-based business
• Office workers
• all deduction guides

ATO sources for this guide

• ATO: Working from home expenses
• ATO: Fixed rate method
• ATO: Actual cost method
• ATO: Occupancy expenses
• ATO: PCG 2023/1 fixed rate method
• ATO: Standard deduction for work-related expenses
• ATO: Records you need to keep
• ATO: Copyright notice

This guide is written in our own words. It draws on information published by the Australian Taxation Office, and some short phrases are quoted with attribution. Source material: © Australian Taxation Office for the Commonwealth of Australia. Top Accountants is not endorsed by, or affiliated with, the ATO.