Working from home tax deductions are one of the most claimed — and most misunderstood — items on Australian tax returns. In 2026, the ATO's revised fixed rate method of 70 cents per hour is the primary way most individuals calculate their home office deductions. Understanding exactly what you can and cannot claim saves money and reduces audit risk. Here is the complete 2026 guide to home office expenses.
The Two ATO Methods for Home Office Deductions in 2026
The ATO offers two methods for calculating working-from-home deductions. You can use whichever gives you the higher deduction, but you cannot mix and match between them for the same period.
Method 1: Revised Fixed Rate Method (70 Cents Per Hour)
The revised fixed rate of 70 cents per hour covers energy expenses, internet, stationery, and computer consumables. It does not cover phone costs — you claim phone expenses separately based on actual work use. You must keep a record of all hours worked from home for the entire income year (a diary or timesheet; estimates are no longer accepted since 1 July 2022).
- 70 cents per hour x total hours worked from home
- Plus: separately claim phone (work-use percentage of total bill)
- Plus: separately claim depreciation on home office equipment (desk, chair, computer)
- Requires: a record of hours worked from home (diary, timesheet, roster)
- Does NOT require: a dedicated home office room
Method 2: Actual Cost Method
Under the actual cost method, you calculate the real cost of each expense based on your actual work use. This requires more record-keeping but may yield a higher deduction if you have a dedicated home office and high energy costs:
- Electricity and gas: (home office floor area / total home area) x hours used x energy cost per hour
- Internet: Actual work-use percentage of total internet bill
- Phone: Actual work-use percentage based on 4-week representative period
- Depreciation: Decline in value of home office furniture and equipment
- Requires: a dedicated home office area used exclusively for work
What You Cannot Claim for Home Office
- Rent or mortgage interest (unless you run a genuine home-based business and have a dedicated business area)
- General household costs (groceries, cleaning, home maintenance)
- Coffee, snacks, or home office refreshments
- Furniture or equipment also used for private purposes (unless you apportion the deduction)
Home Office vs Home-Based Business
If your home is your principal place of business (you run a business from home with a dedicated area not used for private purposes), the rules differ significantly. You may be able to claim a proportion of mortgage interest or rent, rates, insurance, and repairs. However, claiming interest or rent as a deduction reduces your main residence CGT exemption — seek specialist tax advice before doing so.
Frequently Asked Questions
How many hours can I claim for working from home?
You can claim deductions for every hour you genuinely work from home in your income-earning employment — there is no cap. You must keep a continuous record (diary or timesheet) for the full year; the ATO no longer accepts extrapolated estimates from a representative 4-week period for the revised fixed rate method.
Can I claim home office expenses if I work from home only some days?
Yes. You claim deductions only for the hours actually worked from home. If you work 3 days per week at home and 2 days in the office, you record your actual home-working hours and apply the 70-cent rate to those hours only.
Do I need a separate room to claim home office deductions?
Under the revised fixed rate method, no — you do not need a dedicated room. You can work from a kitchen table or shared space. Under the actual cost method, a dedicated area used exclusively or nearly exclusively for work is required to claim occupancy costs.
Not sure which home office method gives you the best deduction? Book a review with AWTS and we will calculate the optimal approach for your situation.
