The home office rate is the shortcut most people use to claim working from home. It is simple for employees, but it is only one of several options, and the rules change once you run a business from home.
This guide compares the employee fixed rate, the actual cost method and the wider home-based business rules for sole traders, including occupancy expenses and the capital gains tax trade-off. It covers the 2025-26 return being lodged now, and every rate was checked against ATO pages on 9 October 2026.
It is for employees choosing a method and small business owners who work from home. If you just want the employee basics, start with our working from home deductions guide.
Key takeaways
- The fixed rate is 70c per hour for 2024-25 and 2025-26, replacing the old 67c rate.
- The fixed rate covers energy, phone, internet and stationery; desks and computers are claimed separately.
- You need a record of actual hours for the whole year; the ATO will not accept estimates.
- Employees generally cannot claim rent or mortgage interest.
- A sole trader with a genuine place of business at home can claim occupancy costs, but may lose part of the CGT main residence exemption.
Home office methods at a glance
| Employee fixed rate | Employee actual cost | Home-based business | |
|---|---|---|---|
| Rate or basis | 70c per hour | Actual extra costs | Fixed rate, actual cost or floor area |
| Energy, phone, internet | Included in rate | Work share claimed | Business share claimed |
| Desk, computer, chair | Claimed separately | Claimed separately | Claimed separately |
| Rent or mortgage interest | No | Rarely | Yes, if place of business |
| Hours record | Actual hours, full year | Actual hours or 4-week diary | All hours worked from home |
| CGT impact on home | None | None | Partial if place of business |
Source: ATO fixed rate method, ATO actual cost method, ATO home-based business expenses, checked 9 October 2026.
What is the home office rate?
It is the ATO’s fixed rate method. You multiply the hours you worked from home by a set rate instead of working out the work share of each bill. The rate is 70c per hour for 2024-25 and 2025-26. It was 67c for 2022-23 and 2023-24, so any guide still quoting 67c is out of date. Check the ATO page for the 2026-27 rate before you lodge next year.
The rate covers:
- Electricity and gas for heating, cooling and lighting.
- Home and mobile phone use.
- Home and mobile internet and data.
- Stationery and computer consumables such as ink and paper.
You cannot claim any of these again separately. You can still claim the decline in value of a desk, chair, computer or monitor, and repairs to them. Items costing $300 or less and used mainly for work are claimed in full in the year you buy them.
What records does the fixed rate need?
You need a record of the actual hours you worked from home for the whole income year, such as a timesheet, roster or diary. In one ATO example, a worker who only started recording in March could claim only the hours recorded from then on. You also need at least one bill or receipt for each type of cost the rate covers.
When is the actual cost method better?
The actual cost method claims the real extra running costs of working from home. It can produce a bigger deduction if you use a lot of power, have a dedicated office you clean, or use your own phone heavily for work. It also needs more work:
- Energy is worked out from the cost per unit of power, the average units used per hour, and your work hours.
- Phone and internet need a work-use percentage from a continuous 4-week period of itemised bills.
- Cleaning is limited to a dedicated home office, using floor area and reduced for any private use.
- You need either a full year of actual hours or a 4-week diary showing your usual pattern.
If you work in a shared lounge room where the lights and heating are on anyway, you have no extra energy cost to claim. Your employer may also pay a working from home allowance under your award or agreement; check the Fair Work Ombudsman website or your agreement. Anything reimbursed cannot be claimed. Our older work from home expenses article has more background.
How is a home-based business different?
Once you run a business from home as a sole trader or partner, the ATO splits costs into two groups.
| Type of cost | Examples | Who can claim |
|---|---|---|
| Running expenses | Electricity, gas, phone, internet, cleaning, equipment | Employees and businesses, for the work or business share |
| Occupancy expenses | Rent, mortgage interest, council rates, land tax, house insurance | Only where part of the home is a place of business |
Source: ATO home-based business expenses, ATO occupancy expenses, checked 9 October 2026.
A sole trader can use the 70c fixed rate, the actual cost method, or the floor area method for running costs. Signs that an area is a place of business include a sign or clear business identity, an area not readily suitable for private use, exclusive or almost exclusive business use, and regular client visits. A kitchen table used for admin does not qualify. If the personal services income rules apply to you, occupancy expenses may not be claimable. Our sole trader deductions guide covers other business claims.
What is the CGT trade-off?
If part of your home is set aside and used exclusively as a place of business and you can claim occupancy expenses, the main residence exemption is reduced when you sell. The reduction is generally the business share of floor area. This applies even if you chose not to claim the mortgage interest. The CGT discount may apply to the taxable part.
Running a business from home rarely makes the home an active asset, so the small business CGT concessions usually do not help. Using the fixed rate without a place of business does not affect the exemption. See our CGT on property guide for the wider rules.
Worked example: an employee and a sole trader
Employee. Jordan works from home 10 hours a week for 48 weeks: 10 x 48 = 480 hours. Jordan also bought a $60 desk lamp and a $120 keyboard used mainly for work ($180). These figures are illustrative.
Fixed rate: 480 x 70c = $336, plus $180 = $516.
Actual cost: internet $960 x 30% = $288, electricity worked out with the ATO hourly method $110, stationery $50, so $288 + $110 + $50 = $448, plus $180 = $628. The actual cost method wins by $112 but needs more records.
Sole trader. Priya runs a bookkeeping business from a dedicated room that is 10% of her home and is a place of business. Mortgage interest $24,000 + rates $2,000 + insurance $1,500 = $27,500 x 10% = $2,750 in occupancy expenses, plus running costs of 1,440 hours x 70c = $1,008. Total: $3,758.
If she later sells with a $300,000 gain, about 10%, or $30,000, would fall outside the main residence exemption, with the CGT discount possibly reducing it.
Rule of thumb: Employees should pick the method that gives the larger claim for the records they can keep. Business owners should only set up a place of business at home after weighing the yearly occupancy deduction against the CGT cost on sale.
Common mistakes with the home office rate
- Using 67c: the rate for 2024-25 and 2025-26 is 70c.
- Estimating hours: the fixed rate needs actual hours for the whole year.
- Double-dipping: claiming internet or phone on top of the fixed rate.
- Employees claiming rent: occupancy costs need a place of business.
- Ignoring CGT: occupancy claims can reduce the main residence exemption.
For other employee claims, see our work-related tax deductions article.
FAQ about the home office rate
What is the ATO home office rate for 2025-26?
The fixed rate is 70 cents for each hour you work from home in 2024-25 and 2025-26. It covers energy, phone, internet, stationery and computer consumables. You need a record of the actual hours you worked from home for the whole year, because estimates are not accepted, and at least one bill or receipt for each type of cost the rate covers.
Can an employee claim rent or mortgage interest?
Almost never. Rent, mortgage interest, council rates and home insurance are occupancy expenses. An employee can only claim them in limited cases where part of the home is set aside as a place of business, which is rare for employees who have an office provided by their employer. Running costs such as energy and internet are claimable instead.
Can a sole trader use the 70c fixed rate?
Yes. The ATO allows sole traders and partnerships to use the fixed rate method for running expenses, with a record of all hours worked from home. Depreciating assets such as a desk or computer are claimed separately. If you also have a genuine place of business at home, you can claim occupancy expenses on top of running costs.
Will claiming home office costs affect CGT on my home?
Only if part of your home is set aside and used exclusively as a place of business and you can claim occupancy expenses for it. Then the main residence exemption is reduced, usually by the business share of floor area. Claiming the 70c fixed rate or running costs alone, without a place of business, does not reduce the exemption.
Can I switch between the fixed rate and actual cost methods?
You choose a method for each income year, and you can use a different method the next year. You cannot mix them for the same costs in one year, for example claiming the fixed rate and then claiming internet separately. Whichever method you use, keep the records it requires, because the ATO will ask for them if it reviews your claim.
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This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO fixed rate, actual cost and occupancy expense pages and the ATO home-based business expenses and CGT pages on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
