WFH Deductions: Fixed Rate vs Actual Cost

Working from home earns you a tax deduction — an expense the ATO lets you subtract from the income you get taxed on. Even a couple of days a week can knock hundreds of dollars off that income, if you claim it right.

The ATO gives you two methods: the fixed rate at 70 cents per hour, or the actual cost method where you tally up your real bills. Here's how each works, the records that make or break them, and which usually comes out ahead.

For 2025-26, the fixed rate method pays you 70 cents for every hour you work from home. That one rate bundles electricity and gas, internet, mobile and home phone use, and stationery and computer consumables — the stuff you use up, like ink and paper.

The maths is simple: 20 hours a week for 48 weeks is 960 hours, times 70 cents — a $672 deduction, with no receipts needed for the bills themselves.

The big catch: the rate already includes your phone and internet, so you can't claim those again separately. Claiming the same cost twice — double dipping — is the classic trigger for an audit, where the ATO digs through your return line by line. And they check for it specifically.

The fixed rate isn't all-consuming. These can still be claimed separately, on top of the 70c rate:

The actual cost method skips the flat rate and claims the work share of your real bills: electricity, gas, internet, phone, consumables, plus depreciation on furniture and equipment.

You'll need a work-versus-personal split you can back up — the floor area of your office and your hours of use for power costs, or a usage diary for phone and internet.

It's more paperwork. But if you run power-hungry equipment, pay big internet and phone bills, or have a dedicated office, it can beat 70c an hour by a wide margin.

The fixed rate method demands a record of your actual hours worked from home for the whole year — a timesheet, roster, diary or similar. A rough guess or a "typical four-week period" no longer cuts it.

You also need at least one bill for each type of running cost the rate covers — one electricity bill, one phone bill — to prove you actually pay those costs.

The actual cost method asks for more: receipts or bills for everything you claim, plus your maths for the work share. Either way, keep it all for five years.

For most casual work-from-homers — a laptop, a kitchen table, ordinary bills — the fixed rate wins on effort and often on dollars too. An hours log is easy, and there are no bills to split up.

Heavy home-office users flip the equation: a dedicated room, big energy bills, expensive internet and a pile of equipment usually push the actual method ahead, sometimes by hundreds of dollars.

The pro move: keep full records for one year and calculate both at tax time — you can pick whichever pays more. Then see what it does to your refund with our Deduction Estimator.