Working from home deductions 2026–27: fixed rate, actual cost and the new $1,000 standard deduction

Working from home is one of the most common deductions in an Australian tax return — and one of the most commonly done badly. Two income years are in play right now: the 2025–26 return you lodge this year, and the 2026–27 year you're currently living in, where a new $1,000 standard deduction changes the maths. Here's how both work.

Who can claim

You can claim working from home expenses if you genuinely work from home to fulfil your employment duties (not just the odd email), you incur additional running costs as a result, and you have records to show both. Sitting in the lounge room while the family watches television doesn't create additional costs, so there is nothing to claim for that time.

The fixed rate method: 70 cents per hour

For 2025–26 the fixed rate is 70 cents for each hour you work from home (the same as 2024–25). The rate bundles together your additional costs for:

• electricity and gas for heating, cooling and lighting;
• home and mobile internet or data;
• home and mobile phone usage; and
• stationery and computer consumables such as ink and paper.

Because these are inside the rate, you can't claim any of them separately — including mobile phone calls you make for work on days you're in the office. If your phone and internet claims would be large on their own, the actual cost method may suit you better.

What you can add on top of the rate is the decline in value of equipment and furniture you use for work: a desk, chair, monitor or laptop. Items costing $300 or less that are used mainly for work can be claimed in full in the year you buy them; dearer items are depreciated over their effective life, at the work-use percentage. Repairs to those items are claimable too.

Working it out is simple: 600 hours × $0.70 = $420, plus depreciation, with the cents dropped from the final figure.

Records: hours for the whole year

This is where most claims fall over. To use the fixed rate method you must keep:

• a record of the actual hours you worked from home across the entire income year — a timesheet, roster, diary, spreadsheet or calendar entries kept at the time. The ATO states plainly that an estimate of hours is not acceptable; and
• at least one document for each type of running expense the rate covers — for example, one quarterly electricity bill and one internet bill.

The ATO's own example makes the point: a worker who estimated her hours for July to February and only started recording them in March could claim the four months of recorded hours, and nothing for the eight months she estimated. Keep the records for five years from the date you lodge.

The actual cost method

Instead of the flat rate, you claim the work-related portion of each real expense: energy, phone, internet, stationery, cleaning of a dedicated home office, and depreciation of furniture and equipment. It can produce a larger deduction for people who work from home most of the week in a dedicated room — but the records are heavier. You need:

• receipts and bills for every expense you claim;
• either a record of actual hours for the whole year, or a continuous four-week diary that represents your usual pattern; and
• a reasonable basis for the apportionment — for example, the power rating of your heater multiplied by hours used and your tariff, or a four-week itemised phone bill with work calls marked.

Where a client's records support both methods, we calculate each and claim the larger allowable amount.

Occupancy expenses: not for employees

Rent, mortgage interest, council rates, land tax and home insurance are occupancy expenses. As an employee working from home you generally can't claim them, even if your employer closed the office. They are only deductible where an area of your home has the character of a place of business — set aside, not readily usable for anything else, and necessary because your employer provides no alternative. The bar is high, and claiming occupancy costs on a home bought after 20-09-1985 brings capital gains tax into play when you sell. If you run a business from home, different rules apply; ask us before claiming.

From 2026–27: the $1,000 standard deduction

For income years starting on or after 01-07-2026, eligible taxpayers receive a standard deduction of up to $1,000 for work-related expenses, applied automatically in the return, with no spending or records required. You're eligible if you're an individual, an Australian resident for tax purposes, and you earn assessable labour income — salary and wages, director's fees and similar. The maximum is the lower of $1,000 and your labour income for the year. It doesn't apply if your only income is business income, dividends or rent.

The important mechanic: the standard deduction is reduced dollar-for-dollar by the work-related expenses you actually claim that it covers — working from home, car and travel, uniforms, tools, self-education and the like. Union fees, professional memberships, donations, tax agent fees, income protection premiums and investment deductions sit outside it and are claimed as normal.

Deciding: claim actuals or take the $1,000?

• Work-related expenses under $1,000: don't claim them. You receive the full standard deduction automatically and you don't need receipts. Claiming $550 of expenses just reduces the standard deduction to $450 — the total is identical, but you've had to keep records.
• Work-related expenses over $1,000: claim the actual amount with written evidence for all of it. Your standard deduction reduces to nil, but your total deduction is higher. Someone with $3,500 of substantiated expenses claims $3,500.
• Not sure where you'll land: keep your hours record and receipts anyway. Costs mount up unexpectedly, and you can only claim the larger amount if the records exist.

For most people working from home a couple of days a week, the fixed rate claim alone falls under $1,000, so from 2026–27 the standard deduction will do the job. For full-time remote workers, people with significant car travel, or anyone depreciating a laptop and a decent chair, claiming actuals will often still win.

The $300 and $150 exceptions have ended

Alongside the standard deduction, the old record-keeping shortcuts were removed from 01-07-2026: the $300 limit for claiming work expenses without receipts, the $150 laundry limit, and the award transport exemption. This applies to everyone, whether or not you qualify for the standard deduction. If you claim more than your standard deduction, you need written evidence for every work-related expense in the claim. The ATO will still accept $1 per load for washing work clothes alone (50c for mixed loads) as a way of working out laundry, but the amount now reduces your standard deduction like any other claim.

Sources

• ATO — Fixed rate method
• ATO — Actual cost method
• ATO — Occupancy expenses
• ATO — Standard deduction for work-related expenses