Virtual Office Space · Box 06
Working from home and tax
The ATO lets employees who work from home claim the additional running expenses that working from home causes, worked out either at a fixed rate for each hour worked at home or at actual cost. For the 2024–25 and 2025–26 income years the fixed rate is 70 cents per work hour, and it needs a record of the actual hours worked, kept at the time; an estimate isn’t accepted.
Who can claim
To claim working from home expenses as an employee, the ATO says you must:
- be doing your actual job from home, which rules out small things like the odd email check or phone call
- have extra running costs that exist because of that work at home
- be able to prove those costs, for example with receipts.
Where an expense is partly private, only the work-related part is deductible. If your employer pays you an allowance for working from home, it goes in your tax return as income.
Two methods
The fixed rate method is an amount for each hour you work from home. It covers home and mobile internet or data, mobile and home phone use, electricity and gas for heating, cooling and lighting, and stationery and computer consumables, so none of those can be claimed again separately. It doesn’t need a dedicated home office, and the decline in value of things like desks, chairs and computers can still be claimed on top.
The actual cost method claims the actual expenses you incur as a result of working from home, with records to show them.
The fixed rates by income year, as the ATO publishes them:
| Income years | Rate per work hour |
|---|---|
| 2024–25 and 2025–26 | 70 cents |
| 2022–23 and 2023–24 | 67 cents |
| 2020–21 and 2021–22 | 52 cents |
As at October 2026, from the ATO’s fixed rate method page (last updated 8 June 2026).
A worked example
The ATO’s steps for a manual calculation are: total the hours worked from home, multiply them by the rate, add the work-related decline in value of depreciating assets, add any other working from home expenses the rate doesn’t cover, then drop the cents rather than rounding. Here they are applied to made-up figures.
Example only · invented figures
An employee, 2025–26 income year
- Hours worked from home, from a timesheet kept at the time: 2 days a week × 6 hours × 46 weeks
- 552 hours
- Fixed rate: 552 hours × 70 cents
- $386.40
- Desk lamp bought for $45, used only when working from home
- $45.00
- Other expenses the rate doesn’t cover
- $0.00
- Total
- $431.40
- Claimed, cents disregarded
- $431
The lamp is claimed in full in the year it’s bought because it cost $300 or less and is used mainly to produce non-business income. Phone, internet and power are inside the 70 cents, so they add nothing here.
Records for the fixed rate
- A record of the actual hours worked from home for the whole income year: a timesheet, roster, diary or similar, kept as you go.
- At least one record for each running expense the rate covers, such as one quarterly electricity bill.
- Records for depreciating assets from the time you buy them: the cost, and how much of the year you use them only for work.
- Kept for 5 years from the date you lodge your tax return, in most cases.
What isn’t claimable
Three things are ruled out. Everyday household supplies such as coffee, tea and milk can’t be claimed, whether or not the workplace supplies them. Nor can equipment the employer gives you, a laptop or mobile phone for instance, or any cost the employer pays you back.
Rent and mortgage interest
As an employee working from home, you generally can’t claim occupancy expenses, which are the costs of owning or renting your home, such as mortgage interest, rent, rates, land tax and house insurance. The exception needs an area of the home with the character of a “place of business”, and all three of these: your work requires a place of business, you had to work from home because your employer doesn’t provide another place, and the area is used exclusively or almost exclusively for work and isn’t readily capable of being used for any other purpose. If your employer provides a place to work, occupancy expenses can’t be claimed. If you are eligible to claim them and acquired your home after 20 September 1985, there are capital gains tax implications.
When the business is yours
For a sole trader or business owner whose home is the principal place of business, the ATO points to its home-based business rules instead. There, a home-based business is one where an area of the home is set aside and used exclusively as a place of business, and only the business portion of expenses is deductible.
- Running expenses can be worked out by actual cost, at a fixed rate per hour, or by floor area where an area is set aside as a place of business.
- Occupancy expenses are claimable only where the area has the character of a place of business. The ATO’s indicators: it is clearly identifiable as one (such as a sign at the front of the house), not easily adapted to private use, used exclusively or almost exclusively for the business, and regularly visited by clients.
- Capital gains tax may apply when you sell a home part of which you used for business.
- A company or trust running from home needs a genuine, market-rate rental contract with the property owner, the ATO says.
- Records for all home-based business expenses are kept for at least 5 years.
Every one of those indicators is about the area inside the home and how it is used.
For business addresses and mail, see what a virtual office is and redirecting and holding business mail.