Working From Home Deductions: The ATO 70c Fixed Rate Explained

By Panbo Ye, CFP^®, FCPA, SMSF Specialist Advisor · Founder of Everglow · Updated 10 October 2026

Navigating the rules for home office deductions has become an essential part of sound financial management for many Australians. The Australian Taxation Office (ATO) provides two approved pathways: the straightforward revised fixed rate method or the more detailed actual cost method. Understanding which is appropriate for your circumstances is key to lodging a compliant and effective tax return.

Written by Panbo Ye, CFP® | FCPA | SSA | Founder, Everglow

Understanding Your Home Office Deduction Options

As a financial adviser, I field questions on this topic regularly. With remote and hybrid work now established for many professionals, knowing which method to use can make a considerable difference to your tax outcome. It is a decision that warrants careful thought and good stewardship.

The principle is straightforward: if you incur an expense to earn your income, you may be able to claim a deduction for it. For your home office, the ATO provides two frameworks to help you calculate your claim fairly and ensure you have the records to substantiate it.

Two Paths to Claiming Your Expenses

When claiming the costs of working from home, you have two options:

• The Revised Fixed Rate Method: This is the simpler approach. You claim a set rate for every hour you work from home, which is designed to cover running costs like electricity, internet, and stationery. It is built for convenience but requires strict record-keeping of hours.
• The Actual Cost Method: This path requires you to calculate and claim the specific work-related portion of your actual expenses. It demands more effort and detailed records but may lead to a larger deduction, particularly if you have a dedicated home office or significant costs.

A common question is whether you are locked into one method. You are not. You can choose whichever approach yields a better and more appropriate result for you each financial year, depending on your circumstances. You may find the fixed rate is suitable one year but switch to the actual cost method the next if your situation changes.

To make an informed choice, you need to understand what is involved in each. Our detailed guide on home office deductions takes a deeper look into these rules.

Setting Up for Success

Whichever method you choose, setting up a proper workspace is the foundation. This is about more than just tax; a well-designed home office can support your focus and well-being. Investing in a quality ergonomic saddle chair for comfort at work and home, for instance, is part of creating a sustainable and productive environment.

Good financial stewardship often begins with a well-structured environment that helps you perform your best work. In the next sections, we will break down how to calculate your claim using both methods.

How the Revised Fixed Rate Method Works

The revised fixed rate method is the more direct option. It’s favoured by many professionals because it can save time and reduce the complexity of calculating the work-related portion of every utility bill.

Instead of meticulously tracking individual costs, you claim a set amount for each hour you work from home. For the 2024–25 and 2025–26 income years, the ATO’s home office rate (the fixed rate method) is 70 cents per hour. It was 67 cents for 2022–23 and 2023–24. Check the ATO website for the rate that applies to the 2026–27 year before you lodge.

What the 70 Cent Rate Covers

This 70-cent figure is not arbitrary. The ATO has bundled the most common running costs into this single rate to simplify the process. When you use this method, you are claiming for the work-related portion of:

• Energy costs: The electricity and gas used for heating, cooling, lighting, and powering your equipment while you work.
• Internet expenses: The cost of your home internet connection.
• Phone expenses: The usage of your mobile and/or home landline for work purposes.
• Stationery and computer supplies: Items like printer paper, ink, and pens.

The key point to understand is that this rate is a package deal. By claiming the 70 cents per hour, you cannot then make a separate, additional claim for any of these specific costs. It represents your full deduction for these particular running expenses.

What You Must Claim Separately

A common point of confusion is what falls outside this bundled rate. There are a few significant expenses that you can, and must, claim separately if you wish to seek a deduction for them.

This primarily includes the decline in value (depreciation) of your capital assets. Think of items like your office desk, ergonomic chair, computer, or printer. Their depreciation is calculated and claimed as a separate deduction.

Any costs for repairing your home office furniture or equipment are also claimed separately, as are any other running costs not on the list above. Our guide on claiming working from home expenses is a useful resource for a deeper dive.

Your Record-Keeping Obligations

While this method is simpler, it does not remove the need for record-keeping. The ATO’s requirements are strict and non-negotiable. If you do not have the right records, you cannot use this method.

To substantiate your claim, you need two things:

1. A record of your hours: You must keep a log of the total number of hours you worked from home for the entire financial year. A spreadsheet, diary, or timesheet that runs from 1 July to 30 June will suffice.
2. Proof you paid the bills: You must keep at least one quarterly or monthly bill for each of the expense types covered by the rate. For example, you will need to have one electricity bill, one phone bill, and one internet bill from the year to prove you actually incurred those costs.

Failing to keep these records means you may not be entitled to make a claim using this method. The ATO’s own guidance, Practical Compliance Guideline PCG 2023/1, makes this requirement clear. Good financial stewardship means treating your records not as a chore, but as the essential proof that supports your tax position.

Calculating Claims with the Actual Cost Method

While the fixed rate method offers a straightforward solution, the actual cost method is where professionals with significant home office expenses may achieve a better tax outcome. This approach demands diligence and meticulous record-keeping, but the effort can be worthwhile. It is a method that rewards precision.

Instead of relying on a single, bundled home office rate, you calculate the work-related portion of each individual cost you incur. It is a more granular process, but one that can give a truer picture of what it costs you to work from home.

Identifying All Potential Expenses

The first step is to compile a comprehensive list of every running expense related to your home office. This method allows you to claim a portion of a wider array of costs than the fixed rate covers.

These expenses generally fall into two categories:

• Running Expenses: These are the day-to-day costs of using your home office. This includes electricity for lighting and cooling, gas for heating, cleaning costs for your dedicated work area, and the work-related slice of your internet and phone bills.
• Decline in Value (Depreciation): This applies to the assets you purchase for your office. You may be able to claim a deduction for the decline in value of your desk, chair, computer, and even carpets and curtains within your dedicated office space.

Every one of these costs must be backed up by a receipt or invoice kept safely throughout the financial year.

Calculating the Work-Related Portion

Once you have tallied your expenses, the next step is to accurately calculate the portion that is genuinely attributable to your work. The ATO expects a reasonable and, most importantly, defensible basis for your calculations.

The most common way to apportion shared household running costs like electricity and gas is by floor area. You measure the total area of your home and the area of your dedicated home office. The office's percentage of the total floor area is the percentage you can claim on those shared bills.

For example, if your dedicated home office is 15 square metres and your total home is 150 square metres, your office makes up 10% of the total area. You could then potentially claim 10% of your quarterly electricity and gas bills as a tax deduction.

Expenses Requiring a Usage Diary

For costs shared between work and private use, like your phone and internet, a floor-area calculation is not appropriate. Here, you need to determine your actual work-related usage instead.

The ATO generally requires you to keep a representative four-week diary to establish a pattern of use. In this diary, you would track your work-related calls and data usage against your private usage. This exercise allows you to arrive at a reasonable percentage to apply to your bills for the rest of the year, provided your usage pattern remains consistent.

For instance, if your diary shows that 40% of your internet usage over that four-week period was for work, you could apply that 40% to your internet bills for the financial year. You can learn more about how this works for assets by reading our detailed guide on the laptop depreciation rate.

Good stewardship means approaching this with discipline. This method is not about guesswork; it is about having a clear, logical, and evidence-based approach for every figure in your tax return. The ATO provides clear instructions on what records you need on their home office expenses page, and following this guidance is essential.

Common Pitfalls and Your Record-Keeping Responsibilities

Sound financial management means understanding risks as well as opportunities. When claiming home office expenses, navigating the rules with care is essential. The Australian Taxation Office (ATO) has clear expectations, and falling short can lead to claim adjustments, penalties, or an audit.

Over the years, we see the same recurring mistakes that are easily avoided with a bit of foresight. Let’s walk through the most common pitfalls so you can approach your tax return with confidence.

The Critical Error of Claiming Occupancy Expenses

This is perhaps the most significant mistake an employee working from home can make. Occupancy expenses are costs tied to owning or renting your property, such as:

• Mortgage interest
• Rent payments
• Council rates
• Land tax
• Home and contents insurance

Unless you are genuinely running a business from your home and it qualifies as your principal place of business, you generally cannot claim these costs as an employee. The ATO draws a firm line; running costs like power and internet are treated very differently from occupancy costs.

Claiming occupancy expenses when you are not entitled to may trigger serious consequences. Most notably, it may create a Capital Gains Tax (CGT) liability when you eventually sell your home, potentially voiding a portion of your main residence exemption and resulting in an unexpected tax bill.

Incorrect Apportionment and Poor Records

Another common tripwire is failing to correctly apportion expenses between work and private use. Guessing a percentage or claiming the entire amount of a bill is not a compliant approach. The onus of proof always rests with you, the taxpayer, to show how you arrived at your calculation.

Your claim must be based on a defensible method, whether it's a floor area calculation for shared running costs or a diary for phone and internet use. Without that evidence, your deduction is at risk.

This leads directly to the next pitfall: insufficient records. To ensure you meet your obligations, it's essential to figure out the best way to organize receipts from the start.

Understanding Your Record-Keeping Responsibilities

The ATO’s requirements are non-negotiable and differ slightly depending on which method you use.

For the Revised Fixed Rate Method, you must keep:

• A record of the total hours you worked from home for the full financial year (e.g., a spreadsheet, diary, or timesheets).
• Evidence you paid for the expenses. You will need at least one bill from the financial year for each category covered (e.g., electricity, phone, internet).

For the Actual Cost Method, you must keep:

• All receipts, invoices, and bank statements for every expense you claim.
• A clear record of how you calculated the work-related portion, including floor area measurements and any representative four-week diaries. Our guide on how to claim business expenses provides more detail here.

The ATO provides exhaustive detail on its expectations in its Practical Compliance Guideline PCG 2023/1. Treating your records with discipline is a hallmark of thoughtful financial management.

Choosing the Right Method for You

The answer isn't about finding the single "best" method, but the one that best fits your specific situation. Making the right choice is a balance between simplicity, the potential tax outcome, and your capacity to keep good records.

A Framework for Your Decision

Making a deliberate choice, rather than just the easiest one, is a mark of good financial stewardship. Your decision will come down to how you work, what you spend, and the time you can commit to record-keeping.

• Choose the Revised Fixed Rate Method if: You prioritise simplicity and your expenses are straightforward. It's a good fit for employees with hybrid roles or those using a shared living space, as it avoids complex calculations for shared bills.
• Choose the Actual Cost Method if: You have a dedicated home office and your expenses are significant. If you've invested in office equipment or your work-related utility costs are high, this method may provide a better tax outcome—as long as you’re prepared to keep detailed records.

Practical Next Steps

1. Review your work setup. Do you have a dedicated room or are you using a shared space? This is often the first deciding factor.
2. Estimate your hours. Calculate the total number of hours you expect to work from home over the financial year. Multiply this by $0.70 to get a baseline claim under the fixed rate method.
3. Tally your major expenses. Gather your main utility bills and asset receipts. Estimate the work-related portion of these costs.
4. Compare the outcomes. If your rough tally of actual costs is clearly higher than the fixed rate total, the extra effort of detailed record-keeping may be a wise investment of your time.
5. Seek professional advice. If you run a business from home, have complex expenses, or simply want certainty, discussing your situation with a qualified tax adviser is a prudent step.

The most appropriate method is one that is both compliant and accurately reflects your financial reality.

If you would like clarity on how these principles may apply to your own circumstances, you may wish to speak with a qualified adviser. You can contact Everglow on 1300 913 929 or email contact@everglow.au to arrange a discussion.

General Advice Warning: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider whether it is appropriate for your circumstances and seek personal financial, tax, or legal advice from a qualified professional.