Many Australian employees who work remotely or in a hybrid pattern ask what they can actually claim in their 2025–26 return. The short answer is that you can usually claim additional running expenses such as electricity, gas, phone, internet, stationery and the decline in value of eligible equipment, provided you incurred the costs in earning your income, were not reimbursed and have records that back every dollar. You must select either the fixed rate method or the actual cost method for your running expenses, keep evidence for at least five years and apply the current Australian Taxation Office guidance for the income year you are lodging.
Understanding work from home deductions in 2026
Australian tax law allows you to deduct expenses that you genuinely incur in the course of earning assessable income. Section 8 1 of the Income Tax Assessment Act 1997 sets the overarching rule that you may claim a deduction for a loss or outgoing to the extent that you incur it in gaining or producing assessable income, as long as the cost is not private, capital or domestic in nature. For employees who work from home this principle translates into a specific set of rules administered by the Australian Taxation Office.
For the 2025–26 income year two broad calculation methods remain on offer. The fixed rate method lets you multiply an hourly rate by the number of hours you worked from home to arrive at a single figure that already bundles electricity, gas, internet, phone and stationery. The actual cost method demands detailed calculations for each expense and then an apportionment for work use. Some employees switch methods from one year to the next if their pattern of work changes but you cannot mix methods for the same hours inside a single year.
Eligible running expenses you may claim
Running expenses are the extra costs that arise only because you use your home as a place of work. The Australian Taxation Office guidance confirms that electricity to run lighting, heating or cooling can be deductible when you work, but only for the portion that relates to your work activities. If you share a room with other household members who are watching television for personal use, you must carve out the private component.
Phone and internet charges can also qualify. Under the fixed rate method these costs are already captured by the hourly rate so you would only top up your claim with individually calculated items such as the decline in value of a computer or office chair. Under the actual cost method you work out the business percentage of each phone or internet bill. A common approach involves a four week representative diary that shows how much data flows toward employment tasks compared with private browsing or streaming.
Stationery and printer consumables also fall under running expenses. Receipts should show date, amount, supplier and a clear description of the items purchased. If a packet of paper or ink cartridge supports both household and employment needs you must apply a reasonable split. The simplest way is to track how many reams feed the home printer solely for client reports or work papers compared with personal school assignments or hobby projects.
Repairs and maintenance linked to work equipment create deductible outgoings too. If you send your laptop for a keyboard fix you can normally claim the work share of that cost. The same principle applies to software subscriptions that enable video conferencing or design work. Always keep invoices and note whether your employer reimbursed any part.
Finally the decline in value of capital items such as desks, ergonomic chairs, monitors and computers opens another deduction category. Where the cost of an asset is no more than the instant asset write-off threshold for employees you may claim it in full in the year of purchase, subject to work use. Otherwise you depreciate the item over its effective life. For example a seven hundred dollar laptop used seventy per cent for your job would give rise to a first year deduction calculated from the prime cost or diminishing value method, depending on your choice.
The fixed rate method for the 2025 26 year
The fixed rate method offers a simple calculation that multiplies your home work hours by an hourly rate published by the Australian Taxation Office. At the time of writing the rate remains 67 cents per hour, the same as the one introduced for the 2022–23 year, though the Australian Taxation Office may update it before the end of June 2026. You must confirm the exact figure on the official site before lodging.
The 67 cent rate absorbs electricity, gas, internet, phone and stationery. Separate claims may still be made for the decline in value of computer equipment and furniture, along with repair costs and cleaning expenses that relate solely to a dedicated home office. You cannot additionally claim rent, mortgage interest or property rates under the fixed rate method unless you satisfy the separate occupancy expense rules, which are stringent and rarely met by salaried employees.
To use this method you need either a dedicated work area or proof that you actually worked at home during the hours claimed. The Australian Taxation Office requires a record of total hours, such as daily time sheets, rosters from your employer, entries in an electronic calendar or a four week representative log that you apply across the year if your pattern remains stable.
The actual cost method explained
Under the actual cost method you work out each extra running expense in dollar terms, identify the part that relates to your employment activities and then add those parts together. The formula is straightforward.
Work-related deduction equals total expense multiplied by work use percentage.
The trick is in gathering evidence that supports the percentage. For electricity and gas, choose either a time basis or a floor area basis. A time basis diary records how many hours you worked in a particular room, multiplied by the wattage of equipment and the tariff on your utility bill. A floor area basis compares the size of your study with the size of the entire home and then adjusts for the number of hours you use the space for work as opposed to personal reading or gaming.
For internet and phone the Australian Taxation Office accepts a four week sample that shows data downloads or call counts, provided your usage pattern remains consistent. You must then pro rate each bill accordingly. For example, if the diary shows that thirty per cent of data goes to work video calls and uploads, you would claim thirty per cent of each monthly internet charge.
Consumables, repairs and depreciation follow the same logic. For a two hundred dollar office chair used exclusively for work you would choose an effective life from the Commissioner of Taxation’s schedule, then apply either the prime cost or diminishing value percentage to arrive at the yearly deduction. If you swivel the same chair for weekend gaming, you would reduce the claim by private use.
Choosing between fixed rate and actual cost
| Question | Fixed rate method | Actual cost method |
|---|---|---|
| Calculation simplicity | High | Moderate to complex |
| Requires energy bills | No | Yes |
| Captures phone and internet automatically | Yes | No the taxpayer must apportion |
| Suitable when records are limited | Yes | No |
| Potentially higher deduction where costs are large | Sometimes lower | Often higher when genuine costs are significant |
The best method depends on your work pattern and record keeping habits. If you work from home two days each week in a moderate climate and your employer provides a laptop and phone, the fixed rate often produces a similar deduction with far less effort. However, if you run multiple power-hungry monitors, pay for high bandwidth fibre and keep fastidious logs, the actual cost method might yield a larger claim. The Australian Taxation Office encourages taxpayers to run both calculations and then select the higher deductible figure, so long as the supporting records meet the relevant substantiation standard.
Occupancy expenses rent or mortgage interest
Running expenses differ from occupancy expenses. Occupancy expenses include rent, mortgage interest, council rates, land tax and house insurance. The Australian Taxation Office only allows employees to claim occupancy expenses where the home office is a place of business, not merely a convenient location to perform employment duties. The space must have the character of a dedicated business place, be separate from household living areas and not be readily adaptable to domestic use.
Even where the criteria are met, you must weigh the possible capital gains tax impact when you eventually sell the property. Claiming a portion of your home as an office can trigger a partial loss of the main residence exemption. This drawback often outweighs any short term tax saving. Consequently, most employees do not claim rent or mortgage interest for remote work. If you believe your circumstances justify the deduction, you should obtain written advice from a registered tax agent before including it in your return.
Record keeping essentials
Every deduction lives or dies on its evidence. The Australian Taxation Office expects contemporaneous records that demonstrate the amount spent, the date, the supplier and the link with income production. Digital receipts, bank statements, energy bills, phone logs and employment rosters all help. Keep a dedicated folder or cloud drive where you store PDFs and spreadsheets as the year progresses.
For the fixed rate method, maintain either a detailed log of actual hours or at minimum a representative four-week diary that you extrapolate, provided your pattern remains consistent. For the actual cost method, keep every invoice plus your working papers showing the method of apportionment. If you depreciate assets, retain the purchase documents and the schedules showing opening adjustable value, depreciation rate, work percentage and closing adjustable value for each year until the asset is fully written off. The law requires you to keep these documents for five years from the date you lodge the return in which the deduction appears.
Worked examples
Imagine Anna, a marketing consultant employed by a Sydney firm, who works from home two days per week across the entire year. She tracks 760 hours at home. Using the fixed rate method at 67 cents, her running expense deduction totals 509.20 dollars. She also claims depreciation of a work-only monitor that cost 450 dollars. Assuming a three-year effective life under diminishing value, her first year deduction for the monitor is 225 dollars. Her total deduction is therefore 734.20 dollars.
Ben lives in Brisbane and works from home full-time. His annual electricity and gas bills total 2,400 dollars. Through a four-week diary, he determines that sixty per cent of power relates to work use. He also pays 1,200 dollars for internet and 600 dollars for phone during the year, with documented work percentages of fifty per cent and forty per cent respectively. His eligible running expenses under the actual cost method are 1,440 dollars for power, 600 dollars for internet and 240 dollars for phone, giving a subtotal of 2,280 dollars. He also depreciates a desktop computer bought for 2,000 dollars, of which eighty per cent is for work. With a four-year prime cost rate, his deduction on the computer is 400 dollars for the first year. His total claim reaches 2,680 dollars, significantly higher than the fixed rate would provide.
Clare rents in Adelaide and occasionally answers calls from her dining table on evenings and weekends. Over the income year, she logs 120 work-from-home hours. At 67 cents per hour, her running expense deduction is only 80.40 dollars. She has no separate assets to depreciate. Clare decides not to pursue the actual cost method because she lacks detailed data for electricity and internet and the likely benefit would be minimal.
Common mistakes and how to steer clear
The Australian Taxation Office frequently identifies errors in work-from-home claims. A typical mistake involves applying the 67 cent rate to total job hours rather than only the hours actually worked at home. Another pitfall is claiming an expense that an employer already reimbursed. Some taxpayers overlook the need to exclude private phone or streaming usage when apportioning internet. Others fail to update the hourly rate for the correct income year and accidentally carry forward a historical figure.
Depreciation also causes confusion. Employees sometimes claim the full cost of a laptop even though they also use it for gaming and entertainment. The correct approach is to apply a reasonable percentage for work use only. Finally, misunderstandings around occupancy expenses lead some workers to claim rent without meeting the place of business test, which can invite Australian Taxation Office review and penalties.
Quick checklist before you lodge
Confirm you used the correct hourly rate for the year if you chose the fixed rate method. Check that you have invoices for every actual cost and evidence of work percentages. Remove any expenses that your employer has reimbursed. Ensure that your hours worked at home are backed by a log, roster or calendar. Keep depreciation schedules for capital items. Store all records for five years in a secure location. Compare fixed rate and actual cost figures and choose the higher legitimate amount.
FAQs
Can I claim working from home expenses in 2026
Yes, provided you spent the money yourself, the cost relates directly to earning your income, you were not reimbursed and you can substantiate the claim with evidence that meets Australian Taxation Office requirements.
What hourly rate applies in 2026
At the time of publication the hourly rate remains 67 cents for the fixed rate method. Always verify the latest figure on the official Australian Taxation Office website before you lodge your return.
Can I claim internet and phone bills
Yes, but only the work-related portion. The fixed rate method already covers these costs, whereas the actual cost method requires you to work out the business share of each bill and claim that percentage.
Can I claim electricity while working from home
Electricity and gas for lighting, heating and running equipment are claimable to the extent they relate to your employment activities. The fixed rate method bundles them in the hourly figure. The actual cost method requires a calculation based on either time or floor area.
Can I claim my desk, chair or computer
You can, provided the item helps you earn your income, you paid for it yourself and you apportion for any private use. Items under the instant asset threshold can often be written off immediately, otherwise you depreciate them over their effective life.
Can I claim rent or mortgage interest
Not in the usual employee scenario. Occupancy expenses only become deductible where your home has the character of a place of business, which is uncommon for salaried staff. Seek professional advice before making such a claim.
Can I claim expenses if my employer reimbursed me
Generally no. If your employer covers the cost you cannot also claim it as a deduction because you did not bear the expense.
Do I need a diary to claim working from home expenses
The fixed rate method needs either a daily hour log or a representative four-week diary. The actual cost method often depends on a four-week diary to establish work use percentages for phone and internet. Without suitable records your claim may be denied.
Is a deduction the same as a refund
No. A deduction lowers your taxable income, which in turn reduces the tax you owe. You do not receive the full amount back in cash.
What if I work from home only occasionally
You may still claim genuine work from home costs, but only for the actual hours and amounts that relate to your income-earning activities. A small claim often arises under the fixed rate method in such cases.
Can sole traders use the same rules
Sole traders operate under home based business guidance that includes rules on occupancy expenses and capital allowances. While some principles overlap, the calculations and consequences differ. Sole traders should consult specific Australian Taxation Office guidance relevant to business taxpayers.
Final word
Working from home can deliver welcome flexibility and efficiency. It also shifts certain costs from the office to the household. By understanding the difference between running and occupancy expenses, choosing the right calculation method and keeping meticulous records, you can lawfully maximise your deduction and minimise the risk of an Australian Taxation Office audit. Always check the current year guidance on the official site and seek advice from a registered tax agent if your situation involves unusual arrangements or significant amounts.
