Understanding Home Office Deductions in Australia
If you work from home, you may be able to claim a tax deduction for the costs you incur. The Australian Taxation Office (ATO) offers two methods to calculate your home office deduction: the fixed rate method and the actual cost method.
Fixed Rate Method (70 Cents Per Hour)
For the 2025-26 income year, the ATO's fixed rate method allows you to claim 70 cents per hour worked from home. This rate covers:
- Electricity and gas for heating, cooling, and lighting
- Decline in value of home office furniture and equipment
- Repairs and maintenance of home office furniture and equipment
- Phone and internet expenses
When to use: The fixed rate method is best if you don't have high home expenses or prefer a simple calculation. You only need to track your hours worked from home.
Actual Cost Method
The actual cost method allows you to claim the work-related portion of your actual running expenses. This usually results in a higher deduction if you have significant home expenses.
What You Can Claim:
- Occupancy expenses (rent, mortgage interest, rates, insurance): Apportioned by floor area only
- Running expenses (electricity, gas, repairs, cleaning): Apportioned by floor area and time used
- Phone and internet: Apportioned by floor area as a proxy for work use
- Depreciation: Decline in value of furniture and equipment, apportioned by floor area
Example: If your home office is 15m² out of a 150m² home (10%), and you work from home for 2,000 hours per year (approximately 23% of the year), you would claim:
- 10% of occupancy expenses (rent, rates, insurance)
- 2.3% of running expenses (10% × 23% = 2.3%)
- 10% of phone/internet costs
Record Keeping
To claim home office deductions, you must keep proper records:
- A diary or timesheet showing the hours you worked from home
- Receipts and bills for expenses (if using actual cost method)
- Evidence that the expense was for work-related purposes
- Records of the floor area of your home office and total home area (if using actual cost method)
What You Cannot Claim
- Coffee, tea, milk, and other general household items (even if consumed while working)
- Occupancy expenses like mortgage payments or rent if you're an employee (except mortgage interest using actual cost method)
- The cost of childcare, even if you're working from home
- Private or capital expenses
Choosing Your Method
You can choose either method, but you cannot use both for the same expenses. Generally:
- Use fixed rate method if you work from home occasionally or have low expenses
- Use actual cost method if you work from home frequently and have significant home expenses
Tip: Try both methods with our calculator to see which gives you a better result. The actual cost method typically gives a higher deduction if you work from home full-time.
ATO Compliance
This calculator uses the latest ATO guidelines for the 2025-26 income year. Make sure you:
- Keep proper records of your work hours and expenses
- Only claim expenses that are work-related
- Do not claim private or capital expenses
- Use reasonable and supportable estimates
For more information, visit the ATO working from home guide.