Changes to Working From Home Tax Deductions: What You Need to Know

The ATO has flagged working from home tax deductions as a top compliance focus, and data-matching now picks up the gap between what you claim and what your employer reports. Get the method wrong or skip the records and you can lose the deduction entirely; in some cases, you may pay it back with interest.

This guide covers what has changed with working from home tax deductions in Australia, how the revised fixed rate method and the actual cost method actually work, what records you must keep, and the proposed $1,000 standard deduction that has been generating plenty of confusion. By the end you will know exactly how to approach your next work from home tax return.

What Has Changed With Working From Home Tax Deductions

The biggest change is gone but the impact lingers. The COVID-era 80 cents per hour shortcut method no longer exists, and the old 52 cents per hour fixed rate has been replaced. Since 1 July 2022, the ATO has run a revised fixed rate method, and from the 2024-25 income year the rate sits at 70 cents per hour.

Alongside that, record-keeping rules have tightened significantly. The ATO will no longer accept a four-week sample diary to estimate the year; you need a contemporaneous record of every hour worked from home for the entire income year. This is the single biggest reason claims are being knocked back.

The Revised Fixed Rate Method

The revised fixed rate method is the simpler of the two options. You claim 70 cents per hour for each hour you genuinely work from home performing employment duties; not for hours spent checking the occasional email or making a quick call.

The 70 cent rate bundles together your home and mobile internet, home and mobile phone usage, electricity and gas for heating, cooling and lighting, and stationery and computer consumables. You cannot claim any of these expenses separately on top of the rate. The ATO calls that double-dipping and it is a major audit trigger.

You can still claim the decline in value of depreciating assets such as desks, chairs, laptops and monitors, plus repairs and maintenance on those items. Items costing $300 or less that are used mainly for work can be claimed in full in the year of purchase. The ATO's fixed rate method page sets out the current rate and the records required.

The Actual Cost Method

The actual cost method takes more effort but often produces a larger deduction, particularly if you have a dedicated home office and significant running expenses. You claim the work-related portion of each individual expense rather than a flat hourly rate.

Claimable items include the work-related share of electricity and gas, home and mobile phone, internet, stationery, cleaning of a dedicated home office space, and the decline in value of office furniture and technology. You need to apportion shared costs fairly; for phone and internet, a continuous four-week usage diary sets your work-related percentage for the rest of the year.

One important rule that catches people out: you cannot claim heating, cooling or lighting for a room where other household members are also using the space, such as the lounge room while family members are watching television.

What You Cannot Claim

Some costs are off-limits regardless of which method you choose. Coffee, tea, milk, snacks and general groceries are not deductible even if consumed during work hours. Children's education expenses, online learning subscriptions and tablets for kids are out, as are any items your employer has provided or already reimbursed you for.

Occupancy costs such as rent, mortgage interest, council rates, water and home insurance are not generally deductible for employees. Even when a sole trader can claim them through a dedicated home office, the trade-off is a capital gains tax exposure on the home when it is eventually sold; in many cases, the CGT cost outweighs the deduction.

The Proposed $1,000 Standard Deduction

From 1 July 2026, the Federal Government has proposed a $1,000 standard tax deduction for work-related expenses. If passed in its current form, eligible taxpayers will be able to claim a flat $1,000 without receipts to cover home office running costs, stationery, work-related phone and internet, and a few other categories.

Two things to keep in mind. First, the measure is still draft legislation and would first apply to the 2026-27 return lodged from July 2027 onwards; it does not affect your 2025-26 return. Second, it is a deduction, not a refund; the actual tax saving depends on your marginal tax rate. If your genuine work-related expenses are above $1,000, claiming actuals will typically deliver a better result.

Record-Keeping: The Top Audit Trigger

The ATO uses data-matching to cross-check your work from home tax return against employer records, allowances paid, and the running costs you have actually incurred. The most common errors are estimates without a diary, claiming the fixed rate while also claiming phone or internet separately, and forgetting to declare a working from home allowance as income.

Records must be kept for five years from the date you lodge. For the fixed rate method, that means a full-year log of hours worked from home plus at least one bill for each running cost the rate covers. For the actual cost method, expect to keep every receipt, invoice, depreciation schedule, and a four-week usage diary for shared bills.

Get Your Working From Home Claim Right

Choosing between the fixed rate and actual cost method depends on your hours worked, the size of your expenses, and the records you have on hand. The information above is general in nature and not personal tax advice; the right approach depends on your specific circumstances.

Before you lodge, have a registered tax agent review your working from home expenses alongside the rest of your return. To book a session for your 2025-26 return, contact The Calculators.