If you do any of your job from the kitchen table, the spare room or a home office, you may be entitled to claim a deduction for the extra running costs. The catch is that working-from-home claims are one of the ATO's favourite review areas, so it pays to get the method and the paperwork right the first time.
The two methods you can choose from
The ATO generally lets you claim home running costs in one of two ways, and you pick whichever suits you each year.
- Fixed-rate method: you claim a set amount for every hour you work from home. For 2025-26 the rate is 70 cents per hour, and that single figure is designed to cover electricity, gas, phone, internet, stationery and computer consumables.
- Actual-cost method: you work out the real work-related portion of each expense, based on your genuine usage. This is more effort, but it can produce a larger deduction if your costs are high.
The fixed rate is simpler and harder to get wrong. The actual method may be worth the extra work if you run a serious home setup, but it relies on detailed evidence for every cost you claim.
The record that matters most
Whichever method you choose, the single most important record is the number of hours you actually worked from home across the year.
For the fixed-rate method, an estimate or a four-week sample diary is no longer enough on its own. You generally need a record of the actual hours worked from home for the whole income year, so the easiest approach is to keep an ongoing log as you go rather than trying to reconstruct it in July. A timesheet, roster, diary or app record can all work, as long as it is genuine and contemporaneous.
What the fixed rate actually covers
The 70 cents per hour is meant to roll several everyday running costs into one number:
- Electricity and gas for heating, cooling and lighting
- Home and mobile phone use for work
- Internet and data
- Stationery and computer consumables such as paper and ink
Because those items are already inside the rate, you cannot claim them again separately on top of the fixed rate. You can, however, still separately claim the work-related decline in value of bigger assets like a laptop, desk or office chair, and the repairs and maintenance on them, provided you keep the receipts and apportion for any private use.
Common mistakes that draw attention
A few errors come up again and again, and each one is an easy flag for the ATO.
- Double dipping: claiming the fixed rate and then also claiming the same electricity, phone or internet costs as separate items. You generally get one or the other, not both.
- Claiming time you were not really working: hours need to reflect genuine work, not time spent doing chores or relaxing while logged in.
- Claiming occupancy costs: rent, mortgage interest, council rates and home insurance are rarely deductible for an employee. Claiming them can also affect the main-residence capital gains tax exemption on your home when you eventually sell, which can be a costly surprise.
- No records: a deduction without evidence of hours and expenses is the easiest thing for a reviewer to deny.
Employees versus sole traders
If you are an employee, you are generally claiming the extra running costs of working from home, and occupancy costs are usually off the table. If you run a business as a sole trader and your home is genuinely your principal place of business, the rules can be different and a portion of occupancy costs may sometimes be claimable.
That distinction has real consequences, including for capital gains tax on your home, so it is worth getting advice before you treat your home as a business premises rather than just a place you happen to work.
Getting it right
Working-from-home deductions are worth claiming, but they reward people who keep tidy records and pick the right method for their situation. A little structure during the year, an hours log and receipts for the bigger items, makes tax time far less stressful and your claim far more defensible.
If you would like help choosing between the fixed-rate and actual-cost methods, or simply want to make sure you are claiming the deductions you are entitled to, we are happy to walk through it with you. Book a chat at nebulaaccounting.au or call 0433 822 227.
This article is general information only and does not take account of your personal circumstances — it is not personal tax, financial or legal advice. Tax laws change and apply differently to different people. Nebula Accounting Pty Ltd is a registered tax agent (No. 26259377); please speak with us or check with the ATO before acting.