Highlights

  • The fixed-rate method lets people claim 70 cents for each hour worked at home in 2025–26 returns.
  • Claims need a record of actual hours worked from home all year; estimates and four-week samples generally fall short.
  • The rate covers electricity, gas, phone, internet and stationery, so those costs cannot be claimed again separately.
  • Equipment depreciation, such as a desk, chair or computer, can be claimed separately, and occupancy costs like rent generally cannot.

Imagine an employee on $85,000 who works from home three days a week. At tax time she reaches for the fixed-rate method and expects a tidy deduction. Whether she gets one depends on something unglamorous: timesheets showing every hour worked at home across the whole income year. With self-preparers facing a deadline of 11:59pm on Monday 2 November, and work-related expenses a stated ATO focus, her case shows how the 70-cent rate really works.

The warning this tax time

Mark Chapman, a tax communications director, says people tend either to forget legitimate expenses or to claim too aggressively. "Working from home is a good example," he said. The ATO's Tax Time 2026 focus areas, announced in April, are work-related expenses, omitted income and misinformation from AI tools, finfluencers and friends.

Pre-fill helps, but it does not cover deductions. Looking ahead, a $1,000 standard deduction for work-related expenses has been legislated, though it is not expected to affect 2025–26 returns.

How the 70-cent rate works

For 2025–26 returns, the ATO says employees and others who work from home can claim 70 cents for each hour worked there. The rate is built to cover a bundle of running costs: electricity and gas for heating, cooling and lighting, phone and internet usage, and stationery and computer consumables such as printer ink. Because those costs are baked in, they cannot be claimed separately on top.

Some costs sit outside the rate. The main one is the decline in value of equipment such as a desk, chair, computer or monitor. Items costing more than $300 are generally depreciated over their effective life rather than claimed immediately, and only the work-use share is deductible.

The record-keeping rules

This is where many claims fall down. The ATO generally requires a record of actual hours worked from home across the whole income year. Timesheets, rosters, work-system logs or a diary kept at the time can all count. An estimate, or a four-week sample stretched over the year, is generally not enough.

Taxpayers also need at least one document for each type of running cost the rate covers, such as an electricity or phone bill. The expense must be one the taxpayer actually paid, and where an employer reimburses running costs, those costs generally cannot also be claimed.

What the claim is really worth

Our employee works 7.6 hours a day for 46 weeks. Her timesheets record 3 x 7.6 x 46 = 1,048.8 hours, so her fixed-rate claim is 1,048.8 x $0.70 = $734.16. That is a deduction, not a refund. At 30% plus the 2% Medicare levy, it saves about $234.93 in tax.

Suppose she also bought a $1,200 laptop on 1 July 2025 and used it 50% for work. Assuming a two-year effective life and the prime cost method, the 2025–26 deduction is $1,200 x 50% / 2 = $300. Her total claim becomes $1,034.16, saving about $330.93 at 32%. Without records of her hours, the fixed-rate claim could be reduced or disallowed on review, with penalties and interest on any shortfall.

Fixed rate or actual cost?

The alternative is the actual cost method, which works out the real additional running costs. It can produce a bigger claim for people with high energy bills or a dedicated home office, but it demands itemised bills and a reasonable basis for the work-related share. Taxpayers can generally choose whichever method suits them for the year.

Neither method generally covers occupancy expenses such as rent, mortgage interest, council rates or home insurance. These are generally limited to people whose home is their principal place of business.

Anyone planning to use the fixed rate in 2026–27 needs hours records from 1 July 2026.