WFH Tax Deduction 2025-26 — Fixed Rate 70c/hr vs Actual Cost Method (ATO)

General information only. This is not tax or financial advice. The ATO updates PCG 2023/1 from time to time — confirm current rates with your tax agent before lodging.

For 2025-26 the ATO allows two methods to claim running costs incurred while working from home: the revised fixed-rate method under PCG 2023/1 (currently 70 cents per hour) or the actual cost method. They look similar on the surface but the record-keeping, what’s covered, and the result in dollars can diverge sharply.

This article compares both, sets out the minimum documentation you need, and works through a 1,200-hour WFH year showing $840 under fixed rate vs $1,400 under actual cost — with the caveats that make the actual-cost figure real or unsustainable.

The Two Methods at a Glance

The 70c rate first applied from 1 July 2024 and continues to apply for the 2024-25 and 2025-26 income years. (The previous rate was 67c for 2023-24, and 52c under the pre-2023 fixed-rate method.)

Fixed-Rate Method: What’s Actually Included

At 70 cents per hour, the ATO has bundled the following into the rate:

• Home and mobile internet data
• Electricity and gas for lighting, heating, cooling
• Stationery and computer consumables
• Mobile and home phone usage

You cannot claim any of these items separately on top of the 70c rate for the hours claimed — that’s the double-up the ATO explicitly prevents.

What you can still claim separately when using the fixed-rate method:

• Decline in value (depreciation) of assets used for work — laptop, monitor, desk, office chair — for the work-use portion
• Repairs and maintenance of those assets
• Cleaning costs if you have a dedicated home office

Record-Keeping: This Is Where Claims Fail at Audit

The revised fixed-rate method tightened the record rules significantly. From 1 March 2023 onward, a diary of “typical” hours is no longer enough. You need:

• A record of every hour worked from home for the full year — a timesheet, calendar, roster, or diary. Time-tracking apps count if they’re contemporaneous.
• One bill for each of the expense categories the 70c rate covers (to prove you actually paid for electricity, internet, phone, etc.).

For actual cost, the bar is higher:

• Representative 4-week diary of your usage pattern, renewed whenever circumstances change
• All bills and receipts for the full year
• Reasonable basis for the work-use percentage of each bill (floor area, kWh measurement, usage hours for internet)

The ATO has flagged WFH claims as a compliance focus every year since 2022. Keep records for 5 years from lodgement.

Worked Example: 1,200 Hours WFH

Ravi is a marketing analyst on $120,000 who worked from home 3 days a week for 50 weeks, averaging 8 hours per WFH day = 1,200 hours in 2025-26. His annual shared household expenses are:

Fixed-rate method:

1,200 hours × $0.70 = $840

Plus separately: laptop depreciation (not in the rate) of, say, $400. Total deduction: $1,240.

Actual cost method:

$1,437 running costs + $400 laptop depreciation = $1,837.

Rounded in the article headline, we’d frame this as $840 fixed vs ~$1,400 for just the running-cost portion — before depreciation, which is claimable under both.

But the Caveats

The actual-cost result is real only if Ravi has:

1. A representative 4-week diary showing the claimed work-use percentages are defensible.
2. Every bill for every month of 2025-26.
3. A rational basis for 18% of electricity (e.g., one of four rooms used exclusively for 8 hours of a 16-waking-hour day = ~12.5%, which suggests Ravi may have been optimistic — the ATO would likely challenge 18%).
4. No double claim — he has not separately claimed internet elsewhere.

If any of those break down, the actual-cost number gets written down. Fixed rate costs less in audit complexity.

Rule of thumb: if your WFH bills are heavy (big household, high-power equipment, dedicated office) and you’re organised with receipts, actual cost wins. If you work from a laptop in a shared space and your bills are modest, the 70c fixed rate usually wins on effort-adjusted basis.

Run your own comparison with the work-from-home deductions calculator or see the full head-to-head at the fixed-rate vs actual-cost WFH scenario.

Hours Required to Break Even

At a 30% marginal rate (plus 2% Medicare) — the post-Stage 3 bracket for $45,001–$135,000 earners — here’s what the 70c fixed-rate method yields per week of WFH hours:

Higher earners ($135,001+ on 37%+2%=39%) and top-bracket earners ($190,001+ on 45%+2%=47%) get proportionally more. Add the depreciation on your laptop/monitor/desk on top.

What’s Changed vs Prior Years

The shortcut method is gone — don’t try to claim 80c. The “old” 52c method ceased on 30 June 2022.

Frequently asked questions

Q: Can I claim coffee, snacks or a new desk chair under the 70c rate? Food and drink are never deductible. A desk chair (over $300) is depreciated separately over its effective life; under $300 can be claimed immediately — independent of which method you use for running costs.

Q: What if I occasionally work at a café? The fixed rate only covers hours worked from home. Café hours don’t count toward the hour total, and you can’t claim café running costs.

Q: Can I claim rent or mortgage interest? Generally no — unless you run a business from home with a dedicated “place of business” (specific signage, client visits, exclusive use). For most employees the answer is no, and claiming it can trigger CGT consequences on your main residence later.

Q: Does the ATO verify my hours? Yes — they can and do. The ATO’s data-matching has expanded. A “typical 38-hour week × 52” estimate will almost certainly be rejected on audit.

Q: Can I switch methods mid-year? No — you pick one method per income year and apply it to all your WFH hours for that year. You can pick a different method the following year.

Sources

• ATO — PCG 2023/1: Claiming a deduction for additional running expenses incurred while working from home — ATO compliance approach
• ATO — Working from home expenses
• ATO — Records you need to keep for WFH deductions
• ATO — Depreciating assets you use for work

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Model your WFH claim before you lodge

Use the work-from-home deductions calculator to test both methods side-by-side, then feed the result into the income tax calculator to see your refund impact. Keep a hour-by-hour diary from 1 July 2025 — reconstructing it later won’t pass an ATO review.