How Much Is Your Work From Home Deduction Actually Worth?

The ATO fixed rate for 2025-26 is 70 cents per hour worked from home. Two days a week over a 48 week working year is 768 hours, which is a $538 deduction. If you earn between $45,001 and $135,000, that's about $172 back.

The deduction isn't the refund. That distinction is where most of the confusion lives, so here it is in full.

Based on 48 working weeks at 8 hours a day and the 70c fixed rate. Brackets include the 2% Medicare levy: 18% applies from $18,201 to $45,000, 32% to $135,000, 39% to $190,000, and 47% above that.

Why the refund looks small

A deduction reduces the income you're taxed on. It doesn't come off your tax bill directly.

Claim $538 and your taxable income drops by $538. In the 32% bracket, that saves you 32 cents in the dollar, so $172. The other $366 was money you'd already spent on power and internet. You're getting a third of it back, not the lot.

People expecting a four-figure refund from working from home are usually thinking of it the other way around. It doesn't work like that, and it never has.

What the 70 cents covers

The fixed rate bundles five things:

• electricity and gas for heating, cooling and lighting
• internet and data
• mobile and home phone
• stationery
• computer consumables

You can't claim any of those separately on top. Claiming the fixed rate and then adding your phone bill is a double claim, and it's one of the things the ATO looks for.

What sits outside the rate: desks, chairs, monitors, laptops, and the decline in value of equipment. Those are claimed separately, which is where the deduction can actually get interesting.

Equipment is the bigger claim

Buy a $280 monitor used solely for work and you generally claim the full $280 in the year you bought it. In the 32% bracket that's $90 back, which is more than a full year of claiming one day a week at the fixed rate.

Anything above $300 gets depreciated across its effective life. A $1,800 laptop used 80% for work spreads a $1,440 claim over several years rather than landing in one hit.

Keep the receipts. Keep a note of the work-use percentage and how you worked it out.

The record that decides your claim

The ATO's requirement is specific: a record of the total number of hours you worked from home across the entire income year. A timesheet, roster, diary or similar document.

An estimate is not acceptable. Neither is a four-week sample multiplied out, which was allowed under older rules and is not allowed now.

The practical version is a ticked calendar. Mark the days, note the hours, total it at 30 June. It takes ten seconds a day and it's the difference between a claim that holds up and one that doesn't.

When actual cost beats the fixed rate

The actual cost method lets you claim the work-related portion of what you genuinely spent. It wins in specific situations:

• you have a dedicated room used only for work, so apportioning by floor area is straightforward
• your energy costs are high, from running heating or multiple screens all day
• you're full-time at home rather than hybrid
• you bought a lot of equipment and want everything itemised in one method

The cost is paperwork. Every expense needs a record, and every apportionment needs a defensible basis. Floor area, hours of use, work-versus-private split, all documented.

For most hybrid workers doing two or three days at home, the two methods land close enough that the fixed rate wins on effort alone.

What you can't claim

Employees generally cannot claim occupancy expenses. That means rent, mortgage interest, council rates and house insurance are out, even with a dedicated home office.

Also out: coffee, tea, milk and snacks, which are private expenses regardless of where you drink them. And anything your employer reimbursed you for.

One change worth knowing for next year

From 1 July 2026 the second tax bracket rate drops from 16% to 15%. Including the Medicare levy, that bracket moves from 18% to 17%.

If you earn between $18,201 and $45,000, every deduction is worth slightly less next year, because your marginal rate is lower. Not a reason to change anything. Worth knowing when this year's refund and next year's don't match.

The bottom line

At 70 cents an hour, two days a week for a year is a $538 deduction and roughly $172 back in the 32% bracket. Four days a week is $1,075 and about $344.

The equipment claim is usually where the real money sits. Log your hours from day one, keep the receipts for anything you buy, and don't claim your phone bill twice.

Sources checked August 22, 2026: ATO guidance on the fixed rate method and working from home expenses, and resident tax rates. Marginal rates shown include the 2% Medicare levy.