Australian home office setup with laptop and documents representing work-from-home tax deductions

Work-From-Home Tax Deductions: Your Complete 2025–26 Guide for Australian Taxpayers

Millions of Australians now work from home on a regular basis. Because of this, the ATO has made work-from-home (WFH) deductions a top priority for the 2026 tax season. If you worked from home during 2025–26, you may be able to claim a range of costs. But you need to follow the ATO’s rules closely.

This guide covers what you need to know. It explains which method to use, what you can and can’t claim, and how to keep the right records.

Two Methods, One Choice: Fixed Rate vs Actual Cost

For the 2025–26 financial year, the ATO offers two ways to work out your WFH deduction:

  1. The Revised Fixed Rate Method — 70 cents per hour worked from home
  2. The Actual Cost Method — claim the real work-related share of each expense

You can calculate your deduction under both methods. Then, simply choose the one that gives you the better result. The right choice depends on your hours worked, the size of your expenses, and how much paperwork you want to do.

The Fixed Rate Method: 70 Cents Per Hour

The fixed rate method is the simpler option. For every hour you work from home during 2025–26, you can claim 70 cents. This bundled rate covers:

  • Energy costs — electricity and gas for heating, cooling, and lighting your work area
  • Home and mobile internet data
  • Home and mobile phone usage
  • Stationery and computer consumables — printer ink, paper, and pens

What You Can Still Claim Separately

Even when using the fixed rate, you can claim extra deductions for:

  • Depreciation of work-related assets (see our instant asset write-off guide) — this includes laptops, monitors, desks, and office chairs used for work. Items costing over $300 must be depreciated over their useful life. Items $300 or under can be claimed in full in the year you buy them, as long as you use them mainly for work.
  • Repairs and maintenance of work-related equipment and furniture
  • Cleaning costs for a dedicated home office space

Watch Out for the “Double-Dipping” Trap

One of the most common — and costly — mistakes is claiming the 70-cent rate and then also claiming internet, phone, or energy bills separately. The ATO calls this “double-dipping.” It is a major audit trigger. If you use the fixed rate, those running costs are already included. Full stop.

The Actual Cost Method: Claim Every Dollar

The actual cost method lets you claim the real work-related share of each cost. It takes more effort. But if you have large WFH costs and a set-up home office, it can give you a much bigger deduction.

What You Can Claim

Under this method, you can claim the work-related share of:

  • Electricity and gas — work this out using the cost per unit of power, the wattage of your equipment, and the hours used for work
  • Phone and internet — split using a four-week usage diary that shows your work use
  • Stationery and consumables — the actual cost, split if also used for personal reasons
  • Depreciation of assets — the work-related share of the decline in value of furniture and technology
  • Repairs and cleaning — for a dedicated home office and work equipment

What You Cannot Claim (No Matter Which Method)

Some expenses are off-limits for employees working from home. This applies regardless of which method you use:

  • Occupancy costs — rent, mortgage interest, council rates, water rates, land tax, and home insurance are not deductible for employees. These are private costs, even if you use a room only for work. Claiming them can also trigger Capital Gains Tax issues when you sell your home.
  • Coffee, tea, and household groceries you consume during work hours
  • Children’s education costs — online learning subscriptions or equipment for your kids
  • Reimbursed expenses — anything your employer has already paid you back for

Record-Keeping: The Make-or-Break Factor

The ATO has tightened its record-keeping rules in recent years. Poor records are the top reason WFH claims get denied. You must keep all records for five years from the date you lodge your return. For more tips, see our EOFY tax planning guide.

What You Need for the Fixed Rate Method

To claim the 70-cent rate, you must have:

  1. A complete log of every hour worked from home for the full income year. Estimates, averages, or a sample week are not enough. You can use a timesheet, roster, calendar, time-tracking app, or a diary kept at the time.
  2. At least one bill for each expense type covered by the rate (energy, phone, internet). This proves you actually paid for those costs.

What You Need for the Actual Cost Method

This method needs more paperwork. You will need:

  1. Receipts for all expenses — invoices and receipts for every asset you bought and every running cost you paid
  2. A full log of hours worked from home — to work out how much you used your office space and equipment
  3. A four-week diary for shared costs like phone and internet. This sets your work-use percentage. You must update it if your situation changes.
  4. Depreciation records — the purchase date, cost, and work-use percentage for assets over $300

ATO Compliance Focus: What’s on the Radar in 2026

The ATO has flagged WFH deductions as a key focus for the 2026 tax season. It uses data-matching tools to cross-check claims against employer records. Here are the common mistakes that attract ATO attention:

  • No record of hours — this is the most frequent error. Estimates and guesses won’t cut it.
  • Double-dipping on the fixed rate and separate running cost claims
  • Claiming occupancy costs as an employee
  • Claiming 100% of shared expenses (phone, internet) without splitting for personal use
  • Wrong depreciation calculations — writing off items over $300 in one year instead of spreading them out
  • Copying last year’s claim without updating for changes in your work setup

Penalties for wrong claims can be harsh. You may have to repay your refund. The ATO can also charge interest. On top of that, you could face a penalty of up to 75% of the tax shortfall for deliberate errors.

Key Takeaways for 2025–26

  • The fixed rate is 70 cents per hour — unchanged from 2024–25
  • The COVID-19 shortcut method (80 cents/hour) no longer exists — don’t try to use it
  • You must log every actual hour worked from home — a sample diary is not enough for the fixed rate method
  • Occupancy costs (rent, mortgage) are not claimable for employees
  • Keep all records for five years from lodgement

Sources

Ready to Maximise Your WFH Deduction?

WFH tax rules can be confusing. The ATO is actively checking claims this tax season, so getting it right matters. The team at TaxServe Australia helps people and small businesses claim every deduction they deserve. We also make sure you have the records to back it up. For business duties, see our BAS lodgement guide.

Need help choosing the right method? Want to organise your records or lodge your 2025–26 tax return? We’re here to help.

Contact TaxServe Australia today for expert, personalised tax advice. Let us make sure your WFH deduction is maximised and fully compliant.

Written & reviewed by Nick Moon, CPA & Registered Tax Agent

Nick Moon is a Certified Practising Accountant (CPA) and Registered Tax Agent with a Master of Professional Accounting, and the founder of Tax Serve — a CPA-led accounting firm at 11 Palmerston St, North Lakes QLD 4509, serving individuals and small businesses across Australia. This article reflects Australian tax law and ATO guidance current at the time of writing and is general information only, not personal advice. Book a consultation or call 0407 579 448.