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Working from home has become a regular part of employment for many Australians. While working remotely can reduce commuting time, it can also mean paying additional costs for electricity, internet, phone use, stationery and work equipment.
If you are preparing an Individual Tax Return, your work from home expenses should be calculated carefully and supported by the appropriate records. Understanding the rules can help you include eligible deductions correctly when completing your Income Tax Return Australia.
This guide explains the main work from home tax deduction rules for Australian taxpayers, including the fixed-rate and actual-cost methods, common expenses, record-keeping requirements and expenses you generally cannot claim.
A work-from-home tax deduction allows eligible taxpayers to claim certain additional expenses they incur because they work from home.
The ATO generally requires three things before you can claim working from home expenses:
Only the work-related portion of an expense can generally be claimed when an expense also has a private component.
This means simply having a home office or working remotely does not automatically make every household expense tax deductible.
Employees who regularly work from home may be able to claim eligible additional running expenses.
For example, you may qualify if your employer allows you to work from home several days each week and you incur additional electricity or internet costs as a result.
However, working from home occasionally is not enough by itself. The work you perform at home needs to be part of your employment duties, and you must have incurred additional expenses as a result.
If your employer reimburses you for an expense, you generally cannot claim the same expense as a deduction because you have not personally incurred the cost. Similarly, equipment supplied by your employer generally cannot be claimed by you.
There are two main methods for calculating working from home expenses:
You need to choose the method that applies to your circumstances and maintain the records required for that method.
The fixed-rate method can be simpler because it uses an hourly rate for specified running expenses. The actual-cost method instead requires you to calculate the work-related portion of your actual expenses.
The ATO currently recognises both methods.
Under the fixed-rate method, you calculate your deduction based on the number of hours you work from home.
The current ATO guidance provides a fixed hourly rate for eligible working from home expenses. For the 2025–26 income year, the rate is 70 cents per hour. Current professional tax guidance also reports a 75-cent rate for 2026–27, but taxpayers should confirm the applicable rate against the latest ATO guidance when preparing a 2026–27 return.
The fixed-rate method covers specified running expenses, including costs associated with:
You cannot claim these same expenses separately if they are already included in the fixed-rate calculation.
Some eligible expenses can still potentially be claimed separately, such as the decline in value of certain work-related depreciating assets and eligible repairs and maintenance. The relevant work-use percentage still needs to be considered.
Suppose an employee works from home for 900 hours during the income year.
Using a hypothetical 70-cent hourly rate:
900 hours × $0.70 = $630
The $630 represents the fixed-rate component for the expenses covered by that rate. Eligible expenses not included in the rate may need to be considered separately.
The important point is that you should use the correct rate for the relevant income year, rather than automatically applying a previous year’s rate.
The actual-cost method works differently.
Instead of applying an hourly rate, you calculate the actual additional expenses you incurred because you worked from home and claim the work-related portion.
Depending on your circumstances, this can include expenses such as:
You need evidence to support the expenses and a reasonable basis for determining the work-related portion.
For example, if your internet connection is used for both work and private activities, you cannot automatically claim 100% of the bill. You need to determine the work-related percentage using a reasonable method and keep supporting records.
There is no single method that is automatically better for every taxpayer.
The fixed-rate method may be easier if you want a relatively straightforward calculation and have ordinary household running expenses.
The actual-cost method may be worth considering if your additional work-related expenses are significant and you have detailed records supporting them.
Before lodging your tax return, you can compare the result under both methods and use the method that produces the appropriate deduction based on your circumstances and supporting records.
The key is not simply choosing the method that produces the largest number. Your claim must be supported by the ATO’s eligibility and substantiation requirements.
Eligible work from home deductions can include additional running expenses and certain work-related assets.
You may be able to claim the work-related portion of additional energy costs associated with working from home.
This can include electricity or gas used for heating, cooling and lighting.
If you pay for your own home internet and use it for work, the work-related portion may be deductible.
However, private use needs to be excluded.
Work-related use of your mobile or home phone may be deductible where you personally incur the expense.
If you use your phone for both work and private purposes, you need to apportion the expense appropriately.
Work-related equipment such as computers, laptops, monitors, desks and chairs may potentially qualify for a deduction or decline-in-value deduction, depending on the circumstances and cost of the asset.
If your employer provides the equipment, you generally cannot claim it yourself.
Items such as stationery and certain computer consumables can be relevant to a working from home claim where they are incurred for work purposes.
The treatment depends on the method you use to calculate your expenses.
In limited circumstances, cleaning costs associated with a dedicated home office may be deductible. The treatment depends on the calculation method and your circumstances.
This is one of the most misunderstood areas of working from home tax deductions.
For employees, rent, mortgage interest, council rates, land tax and home insurance are generally private occupancy expenses and are not automatically deductible simply because you work from home.
There are limited circumstances where occupancy expenses may be deductible. The ATO considers factors such as whether you are required to work from home because an alternative workplace is not available and whether an area of your home is used exclusively or almost exclusively for work.
Occupancy expense claims can also have capital gains tax implications in certain circumstances, particularly where a portion of a home that would otherwise qualify for the main residence exemption is treated as a place used to produce income.
For that reason, occupancy expenses should be considered carefully rather than added to a tax return simply because you have a home office.
Not every expense connected with being at home is a work from home tax deduction.
The ATO specifically identifies several expenses that cannot generally be claimed, including:
You also cannot claim an expense twice. For example, if an expense is already included in the fixed-rate method, you generally cannot claim that same expense again separately.
Record keeping is one of the most important parts of a working from home claim.
You need evidence showing that you incurred the expenses and how you calculated the work-related portion.
Depending on the method you use, relevant records may include:
For the fixed-rate method, you need an appropriate record of the actual hours you worked from home during the relevant income year, together with records supporting the expenses covered by the rate. The ATO’s current guidance emphasises maintaining records that demonstrate both the hours worked and the expenses incurred.
Keeping your records throughout the year is considerably easier than trying to reconstruct your working arrangements immediately before lodging your tax return.
A few common mistakes can create problems with a claim.
Working from home does not turn ordinary household costs into deductible expenses. You need to identify the additional cost that relates to earning your income.
If you use the fixed-rate method, expenses already covered by that rate generally cannot be claimed separately.
If your employer supplied your laptop, monitor or other equipment, you cannot generally claim a deduction for the same item.
For expenses with both private and work use, you need a reasonable basis for calculating the work-related portion.
A deduction calculated using an hourly rate needs appropriate evidence of the hours worked from home. An unsupported estimate can make the claim difficult to substantiate.
The rules can differ when you operate a business from home rather than working from home as an employee.
If you are a sole trader and your home is your principal place of business, different rules can apply to home-based business expenses. These may include certain running expenses and, where the relevant requirements are met, occupancy expenses.
If you operate as a sole trader, your home-based business expenses may need to be considered when preparing your Sole Trader Tax Return. Business owners should assess these expenses separately rather than simply applying employee work from home rules.
For businesses that allow employees to work from home, eligible home-based expenses should also be considered carefully when preparing a Business Tax Return. The treatment of these expenses can depend on whether the costs relate to employees, business operations or private use.
When preparing your Australian tax return, you should first determine whether you meet the eligibility requirements for claiming working from home expenses.
Next, gather your records and decide which calculation method is appropriate for your circumstances. Calculate the work-related portion of your expenses and ensure that private costs are excluded.
If you are lodging an Individual Tax Return, your working from home expenses should be reported with your other eligible work-related deductions. Keeping accurate records can make the process of preparing your Individual Income Tax Return easier and help support your claim if the ATO requests evidence.
If you are unsure about the correct treatment of your expenses, professional Tax Return Advice can help you understand how the rules apply to your circumstances.
Potentially, yes. There is no simple rule that says you must work from home a particular number of days. You need to be working from home to perform your employment duties, incur additional expenses and keep the required records.
Potentially. These expenses can form part of your working from home deduction when the relevant requirements are met. The treatment depends on whether you use the fixed-rate or actual-cost method, and private use must be excluded where applicable.
Employees generally cannot claim rent simply because they work from home. Occupancy expenses are only deductible in limited circumstances where the relevant requirements are satisfied.
A personally purchased laptop used for income-producing work may potentially qualify for a deduction or decline-in-value deduction, depending on its cost, work-related use and the applicable tax rules. Employer-provided equipment generally cannot be claimed by the employee.
No. The two methods are alternative ways of calculating your working from home expenses. You should calculate your claim using the method applicable to your circumstances rather than combining both methods for the same expenses.
Also read: The Most Common Tax Return Errors Australians Make
Working from home can create legitimate tax deductions, but the claim needs to reflect your actual work arrangements and additional expenses.
The most important steps are to confirm that you are eligible, choose the appropriate calculation method, keep accurate records and separate work-related expenses from private costs. Avoid assuming that every expense associated with your home is deductible.
If you are preparing your Australian tax return and are unsure how to calculate your working from home tax deductions, getting professional advice can help you understand which expenses may be relevant to your circumstances.
If you need assistance reviewing your work from home expenses or preparing your return, you can contact Tax Return in Perth to discuss your situation with the Perth tax team.
Need help with your work-from-home claim?
Not sure which expenses you can claim or how to calculate them? Contact Tax Return in Perth for professional assistance with your Australian tax return and working from home deduction.
