Work From Home Tax Deductions 2025-26: Fixed vs Actual

If you did any work from home during 2025-26, you can almost certainly claim a deduction for it. The question is which of the two methods gives you the bigger refund, and what records you need to back it up. Here is how they compare.

This is a historical-year guide. The 2025-26 income year ended on 30 June 2026, and the 70c rate below is the 2025-26 rate. You must use the fixed rate for the income year you are claiming, not the year you happen to be lodging in. As at 13 August 2026 the ATO's own fixed rate page publishes rates only up to 2025-26 — 70c for 2024-25 and 2025-26, 67c for 2022-23 and 2023-24 then 52c for 2020-21 and 2021-22 — and shows no rate for 2026-27. We are not going to guess one. Check the ATO's fixed rate method page (read 13 August 2026) for the rate that applies to your year before you lodge.

The two methods

Fixed rate method — 70c per hour. You claim 70 cents for each hour you worked from home. That rate bundles together the running costs that are hard to split out: electricity, gas, phone, internet, stationery and computer consumables. You cannot then claim those same items separately.

Actual cost method. You work out the actual work-related portion of each running cost and claim that. It takes more effort but can be worth more if you have high power or internet bills, or a dedicated home office.

You can use whichever gives the better result, so it is worth checking both with the Work From Home Deduction Calculator.

70 cents an hour is not what you get back

This is the number that actually matters and almost nobody states it. The deduction is not the money. A deduction reduces your taxable income; what lands in your account is the deduction multiplied by your effective marginal rate.

On 30 hours a week for 48 weeks — 1,440 hours — the fixed rate gives a $1,008 deduction. What that returns depends entirely on your income:

Two things fall out of that. The first is scale: at most incomes an hour of logged work-from-home time is worth 22 to 24 cents, not 70.

The second is stranger. An hour is worth more at $50,000 than at $85,000. The low income tax offset withdraws at 1.5 cents in the dollar from $45,000 to $66,667, so every dollar of income in that band carries 30% tax plus 2% Medicare levy plus that 1.5c of vanishing offset — 33.5%, against 32% above it. If your income sits in that band, keeping the hours diary is worth more to you than it is to someone earning half as much again. The whole scale is set out in what a deduction is actually worth.

That also reframes the record-keeping question. Logging your hours properly is worth $320 to $340 a year on a typical claim at a typical income. Whether that justifies keeping a diary is now a real question with a real answer, rather than a vague sense that you probably should.

What records you need

This is where most claims fall over. For the fixed rate method you need:

• A record of the actual hours you worked from home across the whole year — a diary, roster or timesheet. An estimate or a "4 days a week" is no longer enough.
• At least one bill for each running cost the rate covers (to show you incurred the expense).

For the actual cost method you need records of every expense you claim plus a representative record of your work-related use (for example, a four-week diary to work out your internet percentage).

What you can still claim on top

Under both methods you can separately claim the decline in value (depreciation) of equipment like a desk, office chair, monitor or laptop. Items costing $300 or less can usually be claimed in full in the year you buy them; more expensive items are depreciated over their effective life.

What you generally cannot claim: coffee, tea, milk and other general household items, and (for most employees) rent, mortgage interest or rates.

Where the actual cost method genuinely wins

The fixed rate is the default answer for most people, but there are four situations where the actual cost method is worth the extra work, and they are more specific than "high bills".

• You work from home nearly full time. The fixed rate scales with hours, but so do your real costs, and beyond about three days a week the actual work-related share of a power bill often exceeds what 70c an hour returns.
• You have a dedicated room used only for work. That makes the floor-area apportionment defensible, which is the hardest part of an actual cost claim to substantiate. A laptop on the kitchen table does not.
• Your energy costs are unusually high — ducted heating or cooling running through the working day, or a household on a high tariff.
• You did not keep an hours diary. This one is counterintuitive: without a record of actual hours you cannot use the fixed rate at all, so the actual cost method is not the better option, it is the only one.

The comparison is also not either/or across the whole year — you choose one method for the income year, not per expense.

Which method should you use?

• Fixed rate (70c/hr) is simplest and usually wins if your home running costs are modest and you tracked your hours.
• Actual cost can win if you have a dedicated home office, high energy bills or you work from home most of the week.

Run your real numbers through the WFH calculator — it shows both methods side by side. Then fold the result into your overall return with the Tax Refund Estimator.

General information for the 2025-26 financial year, which ended 30 June 2026. Not financial or tax advice. Rates and rules were checked against the ATO on 13 August 2026 — confirm the rate for your own income year with the ATO before lodging.