What is the home office rate and what’s changed?
Working from home (WFH) is no longer a temporary shift—it’s a normal part of how many Australians work. With that shift, the way you claim home office expenses on your tax return has evolved. The home office rate, set by the Australian Taxation Office, is the method many people use to calculate deductions for the costs of working from home.
In simple terms, the home office rate is part of the fixed rate method, which allows you to claim a set amount per hour worked from home to cover running expenses. These expenses typically include electricity, internet, mobile or phone usage, and basic office consumables like stationery. It’s designed to simplify the process so you don’t need to calculate every individual cost separately.
However, the system hasn’t stayed the same. Prior to recent changes, many Australians used the well-known 80 cents per hour shortcut method, which bundled nearly all home office expenses into one simple rate with minimal record-keeping. While convenient, it didn’t always accurately reflect actual costs—especially for people working from home long-term.
From 2023 onwards, the ATO removed the shortcut method and refined the fixed rate method. This means:
- The fixed rate still applies per hour worked from home
- You must now keep records of actual hours worked
- You need evidence of expenses (such as bills or invoices)
- Some items are no longer included in the rate and may need to be claimed separately
These changes aim to strike a balance between simplicity and accuracy. While the process is still relatively straightforward, it does require a bit more diligence than in previous years.
For many households, this has meant rethinking how they track their work patterns and expenses. It’s no longer enough to estimate—documentation matters. That said, the fixed rate method remains a practical option for most employees and small business owners who work from home regularly.
How to claim WFH on your taxes this year and beyond
Claiming a work-from-home tax deduction comes down to choosing the right method and maintaining the right records. The two main options are the fixed rate method and the actual cost method.
The fixed rate method is the most commonly used because it simplifies the process. You multiply the number of hours worked from home by the ATO’s set hourly rate. This rate is intended to cover common running expenses, which means you don’t need to calculate each one individually.
To make a valid claim under the fixed rate method, you’ll need:
- A record of the actual hours you worked from home (such as a diary, spreadsheet, or timesheet)
- Evidence of running expenses, such as electricity, internet, and phone bills
- Proof that you incurred these expenses and that they relate to your work
- Documentation that shows a clear link between your work and the expenses being claimed
It’s important to understand what the fixed rate method does and does not include.
| Includes | Doesn’t include |
Electricity and gas for heating, cooling, and lighting Internet and phone usage Stationery and small consumables | Office furniture (such as desks and chairs) Computers, monitors, and other equipment Repairs or depreciation of assets These items can often still be claimed, but they must be calculated separately using different tax rules |
The alternative is the actual cost method, which requires you to calculate the exact work-related portion of each expense. This method can potentially result in a larger deduction, but it is more complex and requires detailed records. For most people, the fixed rate method strikes a good balance between ease and accuracy.
Key considerations before claiming
While claiming WFH expenses can reduce your taxable income, it’s important to approach it carefully. The ATO has increased its focus on compliance in this area, and incorrect claims can lead to adjustments or penalties.
Here are some key considerations:
- You must keep adequate records to support your claim
- You cannot claim expenses that have been reimbursed by your employer
- You must apportion expenses between work and personal use
- You cannot double-claim expenses already included in the fixed rate
- The method you choose can impact the total deduction you receive
One of the most common misconceptions is that you can claim a standard amount without any documentation. Under current rules, this is not the case. Even when using the fixed rate method, you still need to show how many hours you worked and that you incurred the relevant expenses.
Another important factor is consistency. If your working from home arrangement changes throughout the year—such as hybrid work or varying hours—you’ll need to reflect that accurately in your records.
For business owners and self-employed individuals, the rules can be slightly different, particularly when it comes to occupancy expenses like rent or mortgage interest. These claims can have broader implications, including potential capital gains tax impacts, so it’s worth seeking professional advice before proceeding.
Understanding the shift from the 80 cents method
The removal of the 80 cents per hour shortcut method marked a significant change in how Australians approach WFH deductions. While it was easy to use, it often oversimplified real costs and didn’t encourage accurate record-keeping.
The updated fixed rate method introduces more accountability. Instead of relying on a blanket rate with minimal evidence, taxpayers now need to demonstrate both their work-from-home hours and the expenses they’re claiming.
This shift reflects a broader trend in tax administration—moving towards greater transparency and accuracy. While it may feel like more work initially, it also creates a fairer system where deductions more closely reflect actual costs. In 2024-2025 the ATO updated its policy and went to a 70 cent per work hour fixed rate.
Practical tips to stay compliant
Staying on top of your WFH claims doesn’t need to be complicated. A few simple habits can make the process much easier at tax time:
- Keep a daily or weekly log of your work-from-home hours
- Save copies of utility bills and invoices in one place
- Use a simple spreadsheet or app to track expenses
- Review your claims periodically to ensure they remain accurate
- Seek advice if your situation becomes more complex
The key is consistency. Small, regular updates are far easier than trying to reconstruct an entire year’s worth of information at the last minute.
How this fits into your broader financial strategy
While WFH deductions can provide some tax relief, they are just one part of your overall financial picture. Understanding how they fit into your broader strategy—such as cash flow, tax planning, and wealth creation—can help you make more informed decisions.
For example, choosing between the fixed rate and actual cost methods isn’t just about convenience. It can affect your taxable income, your record-keeping obligations, and even your long-term financial planning.
This is where having a clear strategy matters, even if you are a smaller size business or a consultant. Rather than treating tax deductions as a once-a-year exercise, integrating them into your overall financial plan can lead to better outcomes over time.
If you’re unsure how to approach this, it may be worth speaking with a professional. The ASIC provides general guidance on financial decision-making, but personalised advice can help you apply these rules to your specific situation.
Not sure if you’re claiming your working from home expenses the right way?
A quick conversation can help you understand what applies to your situation and where you might be missing opportunities.
Book a Clarity Call with the team at 360 Financial Strategists and get a clearer picture of your tax position and overall financial strategy.
Frequently Asked Questions
What is the fixed rate for WFH in 2026 ?
The fixed rate is set by the ATO and is applied per hour worked from home. It is designed to cover common running expenses such as electricity, internet, and phone usage. The exact rate does change over time, so it’s important to check the latest ATO guidance.
Can you claim working from home on your 2026 taxes?
Yes, you can claim WFH expenses if you meet the eligibility criteria and have the appropriate records. The claim must relate directly to your work and not be reimbursed by your employer.
What happened to the 80 cents-per-hour method?
The shortcut method has been removed. Taxpayers now need to use either the fixed rate method or the actual cost method, both of which require more detailed record-keeping. The current fixed rate is now 70 cents in 2026 with record keeping required.
How much can you claim without receipts?
You generally cannot claim WFH expenses without records. Even under the fixed-rate method, you need to show your work-from-home hours and provide evidence of the relevant expenses.
