Working from home: fixed rate or actual cost?

If you work from home as an employee, you can claim the extra running costs that home work causes you. There are two ways to work out the number, and the choice is yours each year.

flowchart TD
  start[You work from home] --> hours{Can you record every hour for the year?}
  hours -->|No| diary[Start a diary first]
  hours -->|Yes| costs{Are extra running costs unusually high?}
  costs -->|Usually not| fixed[Fixed rate]
  costs -->|Yes| compare[Work out actual cost and compare]

The fixed rate method

You claim a set rate for each hour you worked from home. For 2025–26 that rate is 70 cents per hour, which has applied since 1 July 2024. Check the ATO's rate for the year you are claiming before you lodge, because it moves.

The rate is a bundle. It already covers:

• electricity and gas, for lighting, heating, cooling, and running your devices
• internet and data
• mobile and home phone usage
• stationery and computer consumables

Because those are inside the rate, you cannot claim any of them separately on top. What you can still claim separately is the decline in value of the gear itself — desk, chair, monitor, laptop — plus repairs, and cleaning of a dedicated work area.

You don't need a separate room or a dedicated desk to use the fixed rate.

What the fixed rate demands in return

Two record-keeping requirements catch people out.

A record of every hour, for the whole year. Not a four-week sample, not a reasonable estimate. A timesheet, roster, spreadsheet, or diary kept as you go. If the hours you claim are hours you reconstructed in October from memory, they are not the hours the guidance asks for.

One bill for each expense inside the rate. You need to show you actually incurred each type of cost — one electricity bill, one internet bill, and so on. You are not adding them up; you are proving they exist.

The actual cost method

Here you work out the real additional cost of working from home and claim the work-related portion of each item. That means apportioning power by the appliances and hours involved, internet and phone by work use, and so on.

It is more work, and it needs more paper: bills, and a record showing how you worked out each apportionment. It is usually worth it when your circumstances are unusual — a big power draw, a dedicated room, gear you run all day, or high-cost internet you mostly use for work.

Which one is bigger?

Run both, roughly, before you commit. A quick sense of scale for a full-time hybrid worker:

Hours from home	Fixed rate at 70c
500	$350
800	$560
1,200	$840

If your actual apportioned costs comfortably exceed that, the extra effort pays. If they don't, the fixed rate wins on both money and hassle.

The part people lose

Almost nobody loses this deduction because they picked the wrong method. They lose it because the hours were never written down. The fixed rate is generous precisely because it asks you to keep one boring thing — a running count of hours — for twelve months.

Pick a method in July, put the hours somewhere you'll actually update, and the rest of the calculation takes a minute in October.

Also worth knowing

• Employees generally cannot claim occupancy costs — rent, mortgage interest, rates, or home insurance.
• If your employer reimburses a cost, it isn't yours to claim.
• You can use different methods in different years, so revisit the choice annually.