Work-From-Home Tax Deductions in Australia: The 2025–26 ATO Guide

With hybrid and remote work now a permanent feature of Australian working life, claiming work-from-home (WFH) tax deductions has become one of the most common — and most frequently misunderstood — areas of personal tax. For the 2025–26 income year, the Australian Taxation Office (ATO) has maintained two specific methods for calculating these deductions, each with distinct record-keeping requirements. A registered tax agent can help you choose the right method, maximise your legitimate claim, and ensure your records will withstand ATO scrutiny.

Understanding Work-From-Home Tax Deductions in Australia

Work-from-home tax deductions allow employees and sole traders to claim a portion of the additional running costs they incur when performing genuine work duties from their home. The key word is additional — you can only claim costs that arise because of your work, not everyday household expenses you would pay regardless.

The ATO's pandemic-era "shortcut method" (80 cents per hour) was discontinued after the 2021–22 income year and is no longer available. For 2025–26, taxpayers must use either the Fixed Rate Method or the Actual Cost Method. You must choose one method and apply it consistently for the entire financial year — you cannot switch methods mid-year.

To be eligible to claim under either method, you must satisfy three core conditions: you must be performing substantive employment duties from home (not merely checking emails or taking occasional calls), you must incur additional out-of-pocket running expenses as a result, and you must hold valid records to substantiate your claim.

The Two ATO-Approved Methods Explained

The Fixed Rate Method (70 Cents Per Hour)

The Fixed Rate Method is designed for simplicity. You claim 70 cents for every hour you work from home during the 2025–26 income year. This rate covers energy costs (electricity and gas), internet usage, mobile and home phone usage, and stationery and computer consumables. You cannot claim these expenses separately if you use this method.

However, you may still claim separately for the decline in value (depreciation) of depreciating assets such as computers, monitors, desks, and office chairs, as well as repairs and maintenance for those assets and cleaning costs for a dedicated home office.

The record-keeping requirement for this method is strict: you must maintain a record of the actual number of hours worked from home for the entire year. The ATO does not accept estimates or extrapolations from a representative period for this method. Timesheets, rosters, or a contemporaneous diary are all acceptable forms of evidence.

The Actual Cost Method

The Actual Cost Method allows you to claim the actual work-related portion of all relevant running expenses. This includes electricity and gas, phone and internet, stationery, computer consumables, cleaning of a dedicated home office, and the decline in value of depreciating assets.

Because you are claiming actual costs, you must apportion each expense on a fair and reasonable basis — for example, calculating the percentage of your internet usage that is work-related versus personal. This method requires more detailed record-keeping but can yield a significantly higher deduction if your work-related expenses are substantial.

For the Actual Cost Method, you must keep receipts for all expenses, a record of hours worked, and a representative four-week diary demonstrating your work-use pattern for shared expenses like internet and phone.

What You Can and Cannot Claim

Understanding the boundaries of WFH deductions is critical to avoiding an ATO audit or having claims disallowed. The following breakdown clarifies the key inclusions and exclusions.

• Claimable under Fixed Rate: Energy costs, internet, phone, stationery — all bundled into the 70c/hour rate
• Claimable separately under either method: Depreciation of computers, office furniture, and equipment; repairs and maintenance; dedicated home office cleaning
• Claimable under Actual Cost only: The actual work-related proportion of each running expense, calculated individually
• Not claimable by employees: Rent, mortgage interest, council rates, and home insurance — these are occupancy expenses and are generally not deductible for employees. Claiming them can also trigger Capital Gains Tax (CGT) consequences by reducing your main residence exemption
• Not claimable: Expenses reimbursed by your employer, or costs for equipment supplied by your employer
• Immediate write-off: Assets costing $300 or less that are used mainly for work can be claimed as an immediate full deduction in the year of purchase

Common Mistakes That Attract ATO Attention

The ATO uses data-matching technology to identify unusual or inflated deduction claims. Work-from-home deductions are a known area of focus, and the following errors are among the most common reasons claims are disallowed or audited.

• Claiming without records — The ATO requires contemporaneous records; reconstructing a diary after the fact is not acceptable and can result in the entire claim being denied
• Using estimates instead of actual hours — Under the Fixed Rate Method, you must record actual hours worked, not an estimate based on your employment contract
• Double-dipping — Claiming internet costs separately while also using the Fixed Rate Method (which already includes internet) is a common error that triggers ATO review
• Claiming occupancy expenses as an employee — Rent and mortgage interest are not deductible for employees and can create CGT complications
• Failing to apportion shared expenses — If your internet or phone is used for both work and personal purposes, you must only claim the work-related proportion
• Claiming for non-work activities — Checking personal emails, social media, or streaming services does not constitute work-from-home activity for deduction purposes

Australian Regulatory Context: ATO, TPB, and Your Rights

Work-from-home deductions are governed by the Income Tax Assessment Act 1997 and administered by the Australian Taxation Office (ATO). The ATO publishes detailed guidance on its website, including the specific record-keeping requirements for each method, and updates this guidance annually to reflect any policy changes.

Tax agents who assist you with WFH claims must be registered with the Tax Practitioners Board (TPB). Registration requires meeting education and experience standards, holding professional indemnity insurance, and complying with the Tax Agent Services Act 2009 (TASA) and the Code of Professional Conduct. Only registered tax agents are legally permitted to charge a fee for preparing and lodging tax returns on your behalf.

If you disagree with an ATO decision regarding your deductions, you have the right to object within 60 days of receiving the assessment. If the objection is unsuccessful, you can escalate to the Administrative Review Tribunal (ART) or the Federal Court. A registered tax agent can represent you throughout this process.

Records supporting your WFH deductions must be retained for five years from the date you lodge your tax return, or five years from when a dispute is resolved, whichever is later.

Questions to Ask a Tax Agent About Work-From-Home Claims

Before engaging a tax agent to assist with your WFH deductions, prepare targeted questions to ensure they have the expertise and approach you need.

1. Which method — Fixed Rate or Actual Cost — is likely to produce the higher deduction for my specific situation?
2. What records do I need to have kept throughout the year to substantiate my claim?
3. Can I claim depreciation on my home office furniture and equipment, and how is this calculated?
4. Are there any risks associated with my current record-keeping approach that I should address before lodging?
5. If I work from home as a sole trader rather than an employee, does this change what I can claim?
6. How do I correctly apportion expenses like internet and phone between work and personal use?
7. What is your experience with ATO audits of WFH claims, and how would you support me if I were audited?

How MyMoney® Can Help You Find a Registered Tax Agent

Maximising your work-from-home deductions while staying fully compliant with ATO requirements is not a task to leave to guesswork. A registered tax agent brings expertise in current ATO guidance, knowledge of which method suits your circumstances, and the ability to represent you if your return is reviewed.

MyMoney® Marketplace makes it straightforward to connect with qualified, TPB-registered tax agents who specialise in individual and small business tax returns. By posting a brief, you describe your situation once and receive competitive proposals from multiple tax agents — allowing you to compare expertise, fees, and service offerings before making a decision.

Whether you are an employee working from home several days a week, a sole trader running your business from a home office, or a small business owner with complex deduction questions, the right tax agent can ensure you claim every dollar you are entitled to — and nothing more.

Post a Brief on MyMoney® to receive proposals from registered tax agents, or Browse Tax Agents to find a specialist in your area.