The ATO's 67-cent fixed rate method for work-from-home claims is simpler, but the actual cost method might save you more if you have big expenses.
If you worked from home even one day in 2025-26, you can claim tax deductions for home office expenses. The ATO gives you two options: the fixed rate method (67 cents per hour) or the actual cost method (track every expense). Which one puts more money in your pocket depends on how you use your home office. Here's how to choose, calculate, and avoid an audit.
For 2025-26, the ATO's fixed rate method is 67 cents per hour worked from home. That single rate covers energy (electricity, gas), internet, phone, and stationery — but not depreciation of office furniture or computers. You claim those separately. The actual cost method requires you to track every dollar you spend on home office running expenses and claim the work-related percentage.
Both methods require a dedicated home office area. If you work from your dining table, you can still claim — but only for the hours you're actually working, not for general living time.
ATO crackdown on 'working from home' claims: The ATO is paying close attention to home office deductions in 2025-26. If your claim seems high compared to your income (e.g., claiming 2,000+ hours when you only work part-time), expect a review. Keep a diary or timesheet — the ATO accepts contemporaneous records or a reasonable estimate if you can justify it.
The fixed rate method is the easiest. For each hour you work from home, you claim 67 cents. That covers: electricity and gas for heating/cooling/lighting, internet and phone usage, stationery and computer consumables (like printer ink). You also claim separately the decline in value (depreciation) of home office furniture (desk, chair) and computers, plus any repairs to that equipment.
Example: Sarah works from home 3 days a week, 8 hours per day, for 46 weeks (excluding holidays). That's 3 × 8 × 46 = 1,104 hours. Her deduction: 1,104 × $0.67 = $739.68. She also claims $200 depreciation on her office chair and $150 on her laptop (work-use portion only). Total claim: $1,089.68. No need to separate electricity or internet bills.
The actual cost method works best if your home office running expenses are high — for example, you run air conditioning all day, have a premium internet plan, or use a lot of stationery. You need to calculate the work-related percentage of each expense. That means dividing your home office floor area by the total floor area of your home, then applying the hours you work.
Example: Tom has a 10 sqm home office in a 100 sqm house — that's 10% of floor area. He works from home 1,500 hours a year. His total electricity bill is $2,400. He can claim: $2,400 × 10% × (1,500 / 8,760 hours in a year) = $2,400 × 0.10 × 0.171 = $41.04. That's a lot of maths for a small claim. But if he runs the air conditioner 8 hours a day, he might use a 'per hour' method instead, tracking actual usage.
For internet and phone, you need to show the work-related usage. A good approach: keep one month's bill and highlight work calls/data, then apply that percentage to the full year. The ATO expects a reasonable basis — you don't need a forensic audit, but you do need a clear method.
For most employees working from home a few days a week, the fixed rate method is simpler and often yields a similar or better result. You avoid calculating floor areas and apportioning bills. The 67 cents per hour is designed to be generous enough that most people don't need to itemise.
But if you have very high energy costs (e.g., you run a server or a home office in a hot climate with heavy air conditioning), the actual cost method could give you a larger deduction. Similarly, if you work from home full-time and have a dedicated room, the actual cost method might capture more of your electricity and internet.
Sole traders can use either method, but the actual cost method is more common because business owners often have a dedicated home office and can claim a portion of rent or mortgage interest (if they own the home) under the 'occupancy' expenses. However, if you claim occupancy costs, you may trigger capital gains tax implications when you sell your home — the 'main residence exemption' can be partially lost. Get advice from a tax professional before claiming occupancy costs.
For sole traders using the fixed rate method, the 67 cents covers the same items as for employees. You cannot claim occupancy costs (rent, mortgage interest, council rates) under the fixed rate method. So if you're a sole trader with a home office, weigh up: is the simplicity worth losing the occupancy deduction?
The ATO requires a 'contemporaneous record' of hours worked from home for the fixed rate method. That means a diary, timesheet, or calendar entries showing the hours you worked. A reasonable estimate (e.g., 'I worked from home every Tuesday and Thursday') is accepted if you can back it up with evidence like emails or meeting logs. For the actual cost method, you need bills and receipts for every expense, plus a clear calculation of work-use percentage.
Simplify your record keeping: Use a free app like Work from Home Diary (ATO-endorsed) or a simple spreadsheet. Log your hours daily or weekly — it takes 30 seconds. Keep a folder on your phone for photos of receipts. If you use the fixed rate method, you don't need to keep bills for electricity or internet — just the hours log.
The ATO sees these errors every year: claiming the same expense under both methods (e.g., claiming internet separately while using the fixed rate), claiming for hours you weren't actually working (e.g., leaving your computer on while you watch TV), or claiming for a home office that isn't genuinely used for work (e.g., a spare room used as a storage area). Also, remember: the fixed rate method's 67 cents already covers stationery and printer ink — don't claim those again.
If you're an employee, your employer might reimburse you for home office expenses. If they do, you cannot claim those same expenses as a deduction. And if you use the fixed rate method, you cannot claim any expense that the 67 cents already covers — even if your actual costs are higher.
The ATO expects around 6.5 million Australians to claim work-from-home deductions in 2025-26. With the right method and proper records, you can claim every dollar you're entitled to — without raising red flags. When in doubt, ask a tax professional. A $100 consultation could save you $500 in missed deductions or an audit headache.