Working-from-Home Expenses & Tax Deductions in Australia: A 2026 Guide

Working from home is now standard practice for employees, freelancers, sole traders, and small business owners across Australia. But when tax time comes, most people either claim too little because they’re unsure what qualifies, or too much because the Australian Tax Office (ATO) rules aren’t well understood. The difference between the two can be significant. This guide covers what counts as a legitimate work-from-home expense, the two calculation methods available, what you can and can’t claim, and how coworking fits into the picture.

If you’re considering whether a flexible workspace like JustCo could offer a more productive and tax-efficient alternative to working from home, we’ll cover that too.

What Counts as a Work-From-Home Expense?

Not every cost incurred while working from home is claimable. The ATO recognises expenses that are directly related to earning your income and that you personally bear the cost of. The key distinction is between expenses that arise because you work from home and general household costs that you’d incur regardless. Rent, groceries, and general utilities don’t automatically become deductible because you work at the kitchen table.

How you approach deductions also depends on your employment structure. Employees can claim work-related running expenses, but the rules are more limited than those available to sole traders and business owners, who can claim a broader range of costs tied to their business operations.

 Running Expenses vs. Occupancy Expenses

The ATO draws a clear line between two categories of remote work expenses. Understanding which applies to you determines what you can legitimately claim.

For most employees in Australia, only running expenses are claimable. Occupancy costs are generally off the table unless you have a dedicated area of your home used exclusively and regularly for work. That threshold is more commonly met by sole traders operating a genuine home office. If you do meet it, a proportion of rent or mortgage interest may be deductible, calculated based on the floor area used for work relative to the total home. This is a specific circumstance and worth confirming with a registered tax agent before claiming.

The Two Methods: Fixed Rate vs. Actual Cost

The ATO provides two ways to calculate your working-from-home deductions. Which one you use depends on your circumstances, your record-keeping, and how much you stand to claim.

The 70 Cents Per Hour Fixed Rate Method

The revised fixed rate of 70 cents per work hour is the simpler of the two methods. It covers a bundled set of expenses in a single calculation: energy costs, internet, phone usage, and stationery. You don’t need to calculate each of these individually, as the rate accounts for them collectively.

What the fixed rate doesn’t cover is equipment depreciation. If you purchased a laptop, monitor, desk, or office chair for work purposes, those costs can still be claimed separately, either as an immediate deduction or depreciated over time, depending on the item’s cost and the applicable threshold.

The record-keeping requirement under this method is straightforward but not optional. The ATO requires a representative record of your hours worked from home, such as a timesheet, diary, or log. Estimates are not accepted. In limited circumstances where you have a dedicated home office used exclusively for work, you may also be able to claim occupancy expenses such as mortgage interest or rent, and cleaning costs, in addition to the fixed rate.

To illustrate how the method works in practice: a professional working three days per week from home, at approximately 7.5 hours per day across 48 working weeks, accumulates around 1,080 hours per year. At 70 cents per hour, that represents approximately $756 in deductions under the fixed rate method. 

Actual figures will vary based on your working pattern, and the applicable rate should be confirmed with a registered tax agent before lodging.

The Actual Cost Method

The actual cost method requires you to calculate the real cost of each individual expense and apportion the work-related portion accordingly. For the internet, that means identifying the percentage used for work. For power, it involves calculating the energy consumption of devices used during work hours. For occupancy expenses, floor area calculations come into play.

This method suits people with higher-than-average internet costs, expensive equipment, or significant power usage who would receive a greater deduction than the fixed rate method provides. The trade-off is administrative effort. You’ll need receipts, usage logs, and, in some cases, floor area measurements to substantiate every line of your claim.

Which Method Should You Use?

The decision comes down to simplicity versus return. The fixed rate method is easier to administer and requires less documentation. The actual cost method takes more work but may yield a meaningfully higher deduction for those with substantial work-from-home expenses.

Before lodging, it’s worth running a rough comparison using your actual costs to see which method produces a better outcome. One important constraint: you can’t switch methods partway through the financial year. The method you choose applies to the full year, so it pays to decide early.

Not sure if a home office setup is giving you the best return? See how a JustCo coworking daypass compares as a fully claimable business expense.

What You Can and Can’t Claim

Knowing the boundaries of what the ATO accepts is as important as knowing your method. The list below covers the most common items on both sides of that line.

Expenses You Can Claim

The following running expenses are generally claimable for work-from-home purposes across Australia, subject to the method you use and the extent of work-related use.

• Electricity and Gas: The portion of your energy bill attributable to heating, cooling, and powering devices during work hours.
• Internet: The percentage of your internet plan used for work purposes. Apportioning personal and work use accurately is key to getting the balance right on this one.
• Phone: Calls, messages, and mobile data used for work
• Office Furniture and Equipment: Work-related items such as desks, chairs, monitors, and laptops. Items below the relevant cost threshold may be claimed as an immediate deduction; higher-cost items are depreciated over their effective life.
• Computer Consumables and Stationery: Items like printer ink, paper, USB drives, and other consumables used in the course of your work.
• Cleaning: If you have a dedicated room used exclusively for work, a proportional cleaning cost may be claimable. This doesn’t apply to shared spaces.

Expenses You Can’t Claim

These are some of the most commonly misunderstood items. Including them in a claim is likely to attract scrutiny from the ATO.

• Groceries: Personal food and drink expenses aren’t deductible, regardless of whether they’re consumed during work hours at home.
• General Household Items Not Used for Work: Furniture, appliances, or household goods that serve a personal rather than work function can’t be claimed.
• Rent or Mortgage Repayments: Employees generally can’t claim occupancy costs. This applies to the overwhelming majority of people working from home.
• Personal Phone or Internet Use Without Apportionment: Claiming your full phone or internet bill without separating work-related use isn’t permitted. Only the work-related portion qualifies.
• Items Already Reimbursed by an Employer: If your employer has covered a cost, you can’t claim it again as a personal deduction.

Record-Keeping Requirements

The ATO requires substantiation. A credible claim is only as strong as the records behind it. Before reviewing what to keep, the starting point is simple: if you can’t document it, you shouldn’t claim it.

Records to maintain include:

• Receipts and invoices for equipment, furniture, stationery, and consumables
• Timesheets or diary entries showing the hours you worked from home
• Bank statements to support expense claims where receipts are unavailable
• Usage logs for phone and internet if using the actual cost method

Poor or incomplete records are the most common reason the ATO disallows claims. The most reliable approach is to keep records in real time throughout the year rather than reconstructing them before lodgement. The ATO’s myDeductions tool, available through the ATO app, makes this easier by allowing you to log expenses and work hours as they occur. If you’re audited, contemporaneous records carry significantly more weight than anything pieced together after the fact.

One way to simplify this entirely: a JustCo coworking membership is a single, fully claimable expense line with no apportionment, no usage logs, and no hours diary required.

Coworking Space as a Tax-Deductible Business Expense

Working from home isn’t the only option, and for many professionals, it isn’t the most efficient one. Coworking is a legitimate, claimable business expense for eligible taxpayers, and in some cases, it offers a cleaner and more straightforward path to a deduction than the home office route.

Can You Claim Coworking Space on Tax?

For sole traders and business owners, coworking memberships, day passes, and private office fees are generally deductible as a business operating expense. The cost is directly tied to earning income, and there’s no requirement to apportion usage the way you would with a home internet bill or power cost.

For employees, the position is more nuanced. If your employer doesn’t provide an office and you use coworking out of clear necessity rather than personal preference, a partial deduction may apply under ATO rules. This is a fact-specific determination and should be confirmed with a registered tax agent before claiming.

 What Coworking Costs Are Deductible?

The following costs associated with a coworking arrangement are generally claimable for eligible taxpayers.

• Day passes for the coworking space
• Hot desk memberships
• Private office fees
• Meeting room bookings used for business purposes
• Any ancillary costs directly tied to the workspace, including printing and equipment hire

Explore JustCo’s flexible membership options across Sydney and Melbourne.

Is a Coworking Day Pass Worth It Compared to a Home Office Setup?

This isn’t purely a tax question. It’s a productivity-and-cost question that the tax treatment helps answer more clearly. A home office setup carries real costs that aren’t always accounted for upfront: furniture, equipment, ongoing utilities, and the value of the space itself. Coworking is pay-as-you-use, with no upfront capital outlay and a professional environment built in.

To put the comparison in concrete terms: under the fixed rate method, a professional working from home three days per week may claim approximately $756 per year in deductions. For a sole trader using a JustCo day pass at $50 per day for the same three days per week across 48 weeks, the annual cost is $7,200, and the full amount is claimable as a business expense.

Individual tax outcomes vary. You should consult a registered tax agent to confirm what applies to your specific circumstances.

 What a JustCo Day Pass Gets You

A JustCo day pass provides immediate access to a fully equipped, professional workspace with no setup required.

• Fully-Furnished Workspace: Move-in ready desks and work areas with no capital outlay required.
• High-Speed Internet: Reliable connectivity included as standard, with no separate plan to manage or apportion.
• Meeting Rooms on Demand: Book a meeting room when you need it, at a professional standard suited to client and team sessions.
• Professional CBD Environment: A workspace that supports focused, productive work away from home distractions.

JustCo operates across premium CBD locations in Sydney and Melbourne, with spaces designed for individuals and teams of every size. There’s no setup cost, no fitout, and no ongoing infrastructure to manage. For eligible sole traders and business operators, it’s a single, fully claimable expense line that replaces a complex set of home-based calculations.

View JustCo locations in Sydney and Melbourne and find the right workspace solution for your business.

Find a Workspace That Works Harder for Your Business

The right workspace decision isn’t just about where you sit. It’s about what the space costs you, what it gives back, and how cleanly it fits into your financial year. For freelancers, sole traders, and small business owners weighing their options, JustCo’s locations in Sydney and Melbourne offer a starting point worth exploring. Browse available spaces, compare membership options, or book a tour to see the environment in person before you decide.

Frequently Asked Questions About Working from Home Expenses

What can I claim on tax for working from home in Australia?

Eligible work-from-home expenses include energy costs, internet, phone, stationery, office equipment, and furniture used for work. The method you use, fixed rate or actual cost, determines how these are calculated and what records you need to support the claim. For a full breakdown, refer to the What You Can and Can’t Claim section above.

 How much can you claim on tax for working from home?

The amount depends on the number of hours you work from home and the calculation method you choose. Under the fixed rate method, a professional working three days per week from home may claim approximately $756 per year based on around 1,080 hours annually. Individual outcomes vary. Consult a registered tax agent to determine what applies to your situation.

 What is the $1,000 instant tax deduction?

The $1,000 instant deduction is a proposed standard deduction for work-related expenses that doesn’t require receipts. It’s not yet law and, if passed, would apply from the 2026-27 financial year. For taxpayers whose total work-related claims fall below $1,000, it would simplify the process. Those with higher claims are generally better off itemising. It’s a deduction, not a cash refund, with an estimated average tax saving of around $205. Monitor ATO updates and speak with a registered tax agent as the legislation progresses.

How much can I claim from the ATO without receipts?

There’s no blanket threshold that removes the requirement for substantiation. Under current rules, total work-related claims under $300 may not require written evidence in certain circumstances. The proposed $1,000 instant deduction would raise that threshold from 2026-27, if passed. Until then, the ATO expects records to support most claims. For guidance on what to keep and how, refer to the Record-Keeping Requirements section above.