Working From Home Tax Deductions 2026: The New ATO Rules Most Australians Miss
Author
Emmanuel Sarris
Date Published
In August 2025, 36% of employed Australians usually worked from home (Australian Bureau of Statistics, Working Arrangements, 2025). Most of them can claim a deduction at tax time. But the rules changed in a way that catches people out every year, and the ATO is watching this claim more closely than almost any other. Get the records wrong and your deduction can be denied on review. This guide shows you what you can claim in 2026, and the one mistake that sinks most returns.
Key Takeaways
- The ATO fixed rate is 70 cents per hour for the 2025–26 year (ATO, Fixed rate method, 2026).
- You must keep a record of every hour worked from home across the full year — estimates and 4-week sample diaries are no longer accepted.
- The fixed rate already covers phone, internet, and electricity, so you can't claim those separately on top of it.
This guide focuses on the 2026 rule changes and record-keeping. For the full A-to-Z walkthrough, see our comprehensive guide to the Australian working-from-home tax deduction.
What Is the Work-From-Home Fixed Rate in 2026?
In 2026, the ATO fixed rate is 70 cents per hour worked from home for the 2025–26 income year (ATO, Fixed rate method, 2026). That rate rose from 67 cents in 2023–24. It bundles a set of everyday running costs into a single per-hour figure, so you don't have to apportion each bill yourself.
The 70-cent rate covers electricity and gas, home and mobile phone use, internet and data, plus stationery and computer consumables. Here's the catch: because those costs are baked in, you can't also claim your phone or internet bill on the side. Try it, and you've double-dipped.
According to the ATO, the fixed rate method lets you claim 70 cents for each hour you work from home in 2025–26, covering energy, phone, internet, and consumables in one figure (ATO, Fixed rate method, 2026). It's the simplest path for most employees, but simple doesn't mean record-free.
ATO working-from-home fixed rate per hour
ATO fixed rate per hour worked from home
67c
2023–24
70c
2024–25
70c
2025–26
Source: Australian Taxation Office, Fixed rate method, 2026.
For help estimating your likely refund before you lodge, see our tax checklists and calculators.
How Do You Keep Records the ATO Will Actually Accept?
You must keep a record of the total number of hours you worked from home across the entire income year, and the ATO will not accept estimates such as a 4-week representative diary (ATO, Fixed rate method, 2026). This is the single biggest change people miss, and it's where most denied claims start.
The record can take any form, as long as you keep it as the hours happen. A timesheet, a roster, a calendar, or a running diary all work. What doesn't work is sitting down in July and guessing your hours for the year just gone.
You also need at least one bill for each type of expense the rate covers. If you used electricity and your phone while working from home, keep one electricity bill and one phone bill on file. These prove you actually incurred the costs the 70-cent rate represents.
Our advice from the desk: the clients who breeze through ATO review are the ones who logged hours in real time — a simple spreadsheet or calendar entry per workday. The ones who get stuck are reconstructing a year from memory in July. Start your log on 1 July and the work-from-home claim looks after itself.
A quick gut-check: could you show the ATO a contemporaneous record for every hour you're claiming? If the honest answer is no, the fixed rate may not be safe for you this year. For broader record-keeping rules across your whole return, see our individual tax returns.
Fixed Rate or Actual Cost: Which Method Gives the Bigger Refund?
The actual cost method usually produces a larger deduction when you have significant home running costs, because you claim the genuine work-related portion of each expense rather than a flat rate (ATO, Actual cost method, 2026). The trade-off is paperwork. You need receipts and a way to apportion each cost.
Under the actual cost method, you can claim the work-related share of electricity and gas, phone and internet, stationery, and the decline in value of assets like a desk, chair, laptop, or monitor. Items costing $300 or less can be claimed in full in the year you buy them; anything above $300 is depreciated over time.
The ATO confirms the actual cost method lets you claim the work-related portion of all running expenses plus the decline in value of office assets, which can beat the 70-cent rate for taxpayers with high energy or equipment costs (ATO, Actual cost method, 2026). Bought a $1,500 ergonomic setup this year? Actual cost is probably worth the extra effort.
So which wins? If you work limited hours and have modest bills, the fixed rate is faster and often comparable. If you work full-time from home, run a power-hungry setup, or bought equipment this year, run the actual cost numbers before you decide. We can model both for you in a book an appointment.
Why Is the ATO Watching This Deduction So Closely?
Work-related expenses are the ATO's largest individual deduction category, and that scale invites scrutiny. In 2023–24, 10.7 million Australians claimed $31.6 billion in work-related expenses — about 53% of all individual deductions, averaging $2,956 per person (ATO, 2023–24 Taxation Statistics, 2025). Working-from-home costs sit inside that pool.
Because the claim is so common and so often poorly substantiated, the ATO uses data-matching to compare your deductions against benchmarks for your occupation and income. Claims that look high for your job get flagged automatically. With 6.7 million Australians working from home as of June 2025 (Roy Morgan, 2025), even a small error rate is a lot of returns.
Work-related expenses share of individual deductions
Work-related expenses as a share of
all individual deductions (2023–24)
53%
Work-related expenses
All other deductions
$31.6b claimed by 10.7m
people, avg $2,956 each
Source: Australian Taxation Office, 2023–24 Taxation Statistics, 2025.
The lesson isn't to claim less than you're entitled to. It's to claim exactly what you can prove. Good records turn a flagged claim into a non-event.
What's Changing for Tax After 1 July 2026?
From 1 July 2026, the tax rate on income between $18,201 and $45,000 drops from 16% to 15%, with a further cut to 14% from 1 July 2027 (ATO, Personal income tax cuts, 2026). That change applies to the 2026–27 year, not the 2025–26 return you're lodging now.
There's also a proposed $1,000 standard deduction for work-related expenses, flagged to start from 2026–27. If it lands, many people could claim a flat $1,000 without itemising. For your current return, though, the existing rules and the 70-cent fixed rate still apply. Plan ahead, but lodge this year by the book.
How to Claim Your WFH Deduction in 2026: A Quick Checklist
Claiming correctly in 2026 comes down to three steps the ATO can verify, and most disputes trace back to a missing record rather than a wrong number. Follow this and your work-from-home claim should hold up.
- Choose your method. Fixed rate (70c/hour, simple) or actual cost (receipts, often larger). Run both if you're unsure.
- Prove your hours. Keep a full-year, real-time log — timesheet, roster, or diary. No estimates.
- Keep one bill per expense. At minimum, hold one bill for each cost the rate covers (e.g. electricity, phone).
- Don't double up. On the fixed rate, never claim phone or internet separately.
- Get a second look. A registered tax agent can confirm your method and catch errors before the ATO does.
Not sure which method maximises your refund — or whether your records will pass? Australia Wide Tax Solutions has processed over 10,000 returns a year and is registered with the Tax Practitioners Board. Book an in-office appointment in Sydney or lodge online from anywhere via our [lodge online(https://awts.net.au/contact-us/).]
Frequently Asked Questions
No. The ATO no longer accepts a 4-week representative diary or any estimate for the fixed rate method (ATO, Fixed rate method, 2026). You need a record of the actual hours worked from home across the full income year, kept as the hours occur.
The 70-cent rate covers electricity and gas, home and mobile phone use, internet and data, and stationery and computer consumables (ATO, Fixed rate method, 2026). Because these are bundled in, you can't claim any of them separately on top of the fixed rate.
Yes, but not under the fixed rate. The decline in value of furniture and equipment is claimed under the actual cost method (ATO, Actual cost method, 2026). Items costing $300 or less can be claimed in full in the purchase year; items over $300 are depreciated.
Not for the 2025–26 return. The cut from 16% to 15% applies from 1 July 2026, so it affects the 2026–27 income year (ATO, Personal income tax cuts, 2026). Your current return uses the existing rates and the 70-cent fixed rate.
The ATO compares your claim against occupation benchmarks using data-matching, and flagged claims must be substantiated with records (ATO, 2023–24 Taxation Statistics, 2025). If you have a contemporaneous hours log and the required bills, an audit is usually straightforward. Without them, the deduction can be reduced or denied.
The Bottom Line
Working-from-home deductions are worth claiming, but 2026 rewards records over guesswork. Keep these three things straight:
- The fixed rate is 70 cents per hour for 2025–26 and covers phone, internet, and energy in one figure.
- You must log every hour worked from home in real time — no estimates, no 4-week samples.
- Compare the fixed rate against the actual cost method if you have big bills or bought equipment.
Tax time doesn't have to be stressful. If you'd like a registered agent to confirm your method, check your records, and lodge with confidence, the team at Australia Wide Tax Solutions can help in person in Sydney or online. For your next read, see our investment property tax guide if you also earn rental income.
Sources
- Australian Taxation Office, Fixed rate method (working from home expenses), retrieved 2026-06-22, https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/working-from-home-expenses/fixed-rate-method
- Australian Taxation Office, Actual cost method (working from home expenses), retrieved 2026-06-22, https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/working-from-home-expenses/actual-cost-method
- Australian Taxation Office, 2023–24 Taxation Statistics released, retrieved 2026-06-22, https://www.ato.gov.au/media-centre/2023-24-taxation-statistics-released
- Australian Taxation Office, Personal income tax – new tax cuts for every Australian taxpayer, retrieved 2026-06-22, https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer
- Australian Bureau of Statistics, Working Arrangements, August 2025, retrieved 2026-06-22, https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/working-arrangements/latest-release
- Roy Morgan, More than 6.7 million Australians 'work from home', June 2025, retrieved 2026-06-22, https://www.roymorgan.com/findings/9981-work-from-home-june-2025
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