Working From Home Tax Deductions 2026–27: Fixed Rate vs Actual Costs

If part of your working year happened at the kitchen table, in a spare room or out in the shed, there is a good chance you can claim something back for it. The Australian Taxation Office lets you work out your working from home tax deductions in two ways: the fixed rate method, which applies a set amount for every hour you worked from home, or the actual cost method, which adds up what you genuinely spent.

The catch is that the rates have shifted around in recent years, and the method you pick changes what you need to prove if your return gets a closer look. Here is how both options work and how to decide which one suits you.

The two categories of working from home expenses

The ATO sorts the costs you incur by working from home into two main types: running expenses and occupancy expenses. Knowing which bucket an expense falls into matters, because the rules for each are different.

Running expenses cover the day-to-day cost of using your home for work. Some common running expenses include electricity and gas for heating, along with things like internet and phone connection fees for the work portion of your usage. Occupancy expenses relate to the home itself rather than the hours you spend at the desk, and they tend to attract stricter conditions. Check the ATO's current guidance for your situation before you include anything in your return.

How the fixed rate method works

Under the revised fixed cost method, taxpayers can claim 70 cents per work hour. That change applies from 1 July 2024, and the ATO has said the figure reflects the most recent Australian Bureau of Statistics data on the relevant expenses included in the rate.

The maths is refreshingly simple. Work out how many hours you worked from home during the income year, multiply by 70 cents, and that is your deduction. For example, 400 hours worked at home equals a working from home tax deduction of $280 (400 hours x $0.70).

Because the rate is set, you do not need to reconstruct what share of each power bill belonged to your job. You do still need to be able to show how many hours you actually worked from home, so a running log, diary or timesheet is worth keeping from day one.

How the rate has changed over time

The per-hour figure has moved several times, which is why older advice you find online can be out of date.

If you are lodging for a year that straddles a rate change, confirm which figure applies to which period with the ATO or your tax agent rather than assuming.

How the actual cost method works

The actual cost method runs in the opposite direction. Instead of applying a standard rate, you add up the real expenses you incurred because you worked from home, then claim the work-related portion of each one.

That means keeping records: bills, statements, receipts and a sensible way of working out what share of each expense relates to your work. In return, your deduction reflects your own circumstances rather than a national average, which can matter if you work long hours at home, run power-hungry equipment or face unusually high running costs.

If you are torn between the two, the practical answer is to estimate both and compare. Hours multiplied by the fixed rate gives you one number, and a reasonable apportionment of your actual bills gives you the other. Pick the one that is both higher and properly supported by your records.

Other work-related costs you may be able to claim

The hourly rate is not the only thing on the table. Depending on your circumstances, work-related deductions can include the following:

• Work-related IT equipment and office furniture, such as a computer, laptop or mobile phone
• Internet and phone connection fees for the work-related share of your usage
• Work-related travel expenses
• Uniform costs
• Running costs such as electricity and gas for heating

The rules for more expensive items differ from those for smaller purchases, so check the current thresholds before you claim a large piece of equipment outright. Either way, keep the receipt, because a deduction with no proof behind it is easy for the ATO to disallow.

Fixed rate or actual cost: a quick comparison

Neither method is automatically better. A short, straightforward work-from-home arrangement usually suits the fixed rate, while someone with a heavy home workload and a loftier power bill may find the actual cost method comes out ahead.

Record keeping that holds up

Whichever method you use, the deduction only survives if you can back it up. For the fixed rate method that means evidence of your hours, such as a diary, spreadsheet or timesheet. For the actual cost method it means the bills, receipts and calculations behind the work-related share of each expense.

Digital records are easier to defend than a shoebox of paper. Scan receipts as they arrive and file them by category, and it takes a few minutes a week instead of a frantic scramble in July. If you use a tracker, make sure it can export a clean summary you can hand to your accountant or keep alongside your return.

Common mistakes that cost people money

A handful of errors show up year after year. Avoiding them is mostly about being honest and keeping notes.

1. Claiming hours you did not actually work from home. The rate is tied to genuine work hours, not the hours your laptop sat open while you did something else.
2. Mixing personal and work use. The private share of a phone bill, internet plan or laptop is not deductible.
3. Keeping no records at all, then trying to estimate your hours months later from memory.
4. Assuming last year's rate still applies. The figure has changed more than once.
5. Claiming the same cost twice, or claiming under a method you cannot substantiate.

This article is general information only, not tax advice, and Lodgya is not a registered tax agent. Rates, thresholds and rules change, so confirm the current position for the 2026–27 income year with the ATO or a registered tax agent before you lodge.

Frequently Asked Questions

Do I get a tax deduction if I work from home?

You can generally claim a deduction for the work-related costs of working from home, provided you actually worked from home to perform your job and you kept records to support the claim. The deduction is for expenses you incurred, not a payment for working at home, and it must be apportioned so personal use is excluded.

How much can I claim per hour in 2026–27?

The most recently introduced figure is 70 cents per work hour under the revised fixed cost method, which applies from 1 July 2024. Before that, the fixed rate method used 67 cents per hour, and earlier guidance referenced 52 cents per hour for home office running expenses. Rates are reviewed, so confirm the current figure with the ATO before lodging.

How do I calculate my deduction using the fixed rate method?

Multiply your total work-from-home hours for the income year by 70 cents. If you worked 400 hours from home, your deduction is $280 (400 hours x $0.70). The important part is being able to show where those hours came from, so keep a diary, timesheet or log as you go rather than reconstructing it later.

Why did the working from home rate change?

The ATO has said the revised rate reflects the most recent Australian Bureau of Statistics data on the relevant expenses included in the rate. In practice, that means the figure is periodically reviewed against real-world costs such as electricity and gas for heating, so it can move between income years.

Do I still need records if I use the fixed rate?

Yes. Even though you are not tracking individual bills, the fixed rate method is tied to the hours you worked from home, so you need a record of those hours. A simple weekly entry in a spreadsheet or diary is usually enough, and it is far easier than trying to recall twelve months of work patterns at tax time.