Complete guide to claiming work-from-home tax deductions in Australia for 2025-26. The revised fixed rate (67c/hr), what it covers, record-keeping requirements, and the actual cost method compared.
Two Methods for Claiming Work-From-Home Deductions
Since the end of the COVID-19 temporary shortcut method (which ended on 30 June 2022), the ATO has two approved methods for claiming work-from-home expenses:
- The revised fixed rate method — 67 cents per work-from-home hour
- The actual cost method — claiming a portion of your actual expenses
Both methods require you to keep records. The days of claiming home office deductions from a rough estimate or a note in your diary are over. The ATO has significantly tightened record-keeping requirements since 2023.
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The Revised Fixed Rate Method — 67 Cents Per Hour
The revised fixed rate method was introduced on 1 July 2022 (replacing the old 52 cents per hour method). Under this method, you claim 67 cents for every hour you work from home during the income year.
What You Need to Claim It
To use the revised fixed rate method, you must:
- Work from home and incur additional running expenses as a result
- Keep a record of all the hours you worked from home throughout the entire income year (not just a sample period — this changed from 2023)
- Have records to substantiate any additional expenses not covered by the rate that you are claiming separately
⚠️ Critical change from 2023–24 onwards: From the 2023–24 income year, you must keep a record of all work-from-home hours for the entire year. A four-week representative diary is no longer acceptable. The ATO will ask for a full-year timesheet or diary.
What Does the 67 Cents Per Hour Rate Cover?
The revised fixed rate covers these expenses in full — you cannot claim them separately:
- Electricity and gas (energy expenses for heating, cooling, and lighting)
- Internet and data expenses (your home broadband)
- Mobile and home phone call costs
- Stationery and computer consumables (pens, paper, printer ink)
These additional expenses are not covered by the 67c rate and can be claimed separately:
- Decline in value (depreciation) of office furniture and equipment (desk, chair, monitor, laptop)
- Repairs to home office equipment
- Cleaning expenses for a dedicated home office
What Is Not Deductible at All
- Mortgage interest or rent (unless you run a business from home and have a genuinely dedicated work area)
- Coffee, tea, or other personal food and drink consumed while working from home
- General household expenses that existed before working from home
- Equipment primarily purchased for personal use (even if sometimes used for work)
Record Keeping — What the ATO Expects in 2025
The ATO is very specific about what records are acceptable for the 2024–25 income year:
For the Fixed Rate Method
| Record Type | What to Keep |
|---|
| Work hours log | A diary, timesheet, or roster showing every day you worked from home and the hours for each day — for the entire income year (1 July to 30 June) |
| Phone and internet | Evidence you have a phone and internet plan (e.g., a bill) — the rate covers your work portion so no need to calculate percentages |
| Equipment depreciation | Receipts for all equipment purchased for work use |
✅ Best practice: Download the ATO's free myDeductions app and log your work-from-home hours as you go throughout the year. Trying to reconstruct a full year of records at tax time is difficult and the ATO is unlikely to accept estimates.
The Actual Cost Method
Under the actual cost method, you calculate the actual additional costs you incurred due to working from home and claim the work-related percentage of each expense.
How the Calculation Works
For running expenses like electricity, you calculate the additional cost of having your home office equipment running during work hours. For shared expenses like your internet plan, you calculate what percentage of usage is work-related.
Example Calculation
| Expense | Annual Cost | Work % | Deduction |
|---|
| Electricity (home office) | $1,800 | 20% | $360 |
| Internet (home broadband) | $1,200 | 40% | $480 |
| Mobile phone (work calls) | $1,080 | 30% | $324 |
| Stationery and supplies | $200 | 100% | $200 |
| Desk depreciation | $1,200 (cost) | 100% work | $240 (20%pa) |
| Monitor depreciation | $800 (cost) | 80% work | $128 (20%pa) |
| Total deduction | | | $1,732 |
Which Method Is Better for You?
The right choice depends on your individual circumstances. Here is a rough guide:
| Scenario | Better Method |
|---|
| You work from home 3+ days per week | Likely fixed rate — easier and often higher |
| You have a high internet bill you use mostly for work | Actual cost — you can claim a larger portion |
| You purchased expensive equipment recently | Actual cost — depreciation claims are separate |
| You want simplicity and minimal record keeping | Fixed rate (but still need a full-year hours log) |
| You work from home 1-2 days per week | Compare both — fixed rate may be lower |
💡 Quick estimate: If you work from home 3 days per week (roughly 1,500 hours per year), the fixed rate gives you a deduction of 1,500 × $0.67 = $1,005 before considering separate equipment depreciation claims.
Common Mistakes the ATO Is Cracking Down On in 2025
The ATO has publicly flagged work-from-home deductions as a key compliance focus for the 2024–25 tax year. Common errors it is targeting include:
- Claiming the entire year when only working from home for part of it — If you returned to the office in March, you can only claim hours actually worked from home.
- Claiming 100% of phone and internet — Unless your plan is entirely work-dedicated, you must apportion for personal use.
- No records of actual hours — Saying "I worked from home 4 days a week" without a log is no longer accepted.
- Claiming rent or mortgage interest — These are only deductible in very specific circumstances (carrying on a business from home with a dedicated work area).
- Forgetting to claim equipment depreciation separately — Many people using the fixed rate method forget they can still claim a separate deduction for work-related equipment depreciation. This can be worth hundreds of dollars.
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The Records You Must Keep — and When You Must Have Kept Them
The single most common reason a work-from-home deduction is denied is not that the expense was ineligible. It is that the taxpayer could not substantiate it, and could not substantiate it because the records were never created at the time.
A record made at year end, reconstructed from memory, is not a contemporaneous record. The ATO expects records kept as the expense was incurred or as the hours were worked. An estimate produced in October for the year just ended is unlikely to survive scrutiny.
The fixed rate method requires a record of the total actual hours worked from home across the year. A representative four-week diary is no longer sufficient for that method. Timesheets, rosters, diary entries, or a spreadsheet updated as you go all qualify.
The actual cost method requires records of each expense and evidence of the work-related proportion — which generally means a diary showing the pattern of use, plus receipts and bills.
What the fixed rate already covers
Where you use the fixed rate method, certain running expenses are taken to be included in that rate and cannot be claimed separately. These generally cover items such as electricity and gas, internet, mobile and home phone usage, and stationery and computer consumables.
Claiming the fixed rate and then separately claiming your internet bill is a duplication, and it is a common error. Items such as the decline in value of office furniture and equipment are generally claimable separately from the fixed rate, subject to apportionment for private use.
What is never deductible
Occupancy expenses — rent, mortgage interest, council rates, and house insurance — are generally not deductible for an employee working from home, even where a room is used exclusively for work. Claiming them can also affect the main residence capital gains tax exemption.
General household items such as coffee, tea, milk, and other consumables you would buy anyway are private expenses.
Expenses your employer reimbursed cannot be claimed. If the employer paid, you did not incur the cost.
Rates, eligibility criteria, and the treatment of specific expenses change between income years. Verify the current rules with the ATO for the year you are lodging, and speak with a registered tax agent if your circumstances are unusual. This page is general information only and is not tax advice.
📚 Related Calculators & Articles
→ Tax Return Refund Estimator
→ Income Tax Calculator 2025–26
→ Free ATO KM Tax Logbook (for vehicle deductions)
→ Australian Income Tax 2025–26 Complete Guide
→ Redundancy Pay Australia 2025 Guide