What each method actually covers
The fixed rate method is the one our calculator uses above: multiply hours worked from home by a single blended rate, 70¢ for both the 2024–25 and 2025–26 income years, and that one number stands in for electricity and gas, phone and internet, and stationery or computer consumables. It doesn't require a dedicated home office. What it does require, since 1 March 2023, is a record of the actual hours worked from home for the entire income year, not an estimate or a representative sample.
The actual cost method claims the real, apportioned share of running expenses instead of a flat rate: energy costs for heating, cooling and lighting, phone and internet, cleaning if there's a dedicated office, plus decline in value on office furniture and equipment like a desk, monitor or laptop. Energy is apportioned by the actual appliance running and the hours it ran, not a floor-area guess. Phone and internet only need a representative 4-week diary of work-related use, not a full year, an easier record than the fixed rate method now asks for on hours alone. There's no formal rule that a dedicated office is required, but the ATO's own guidance makes the practical case for one: working from a shared lounge room with the rest of the household there too generates no additional running cost to claim, since nothing about that room's energy use changed because of the work happening in it.
A real worked example
Figures below come from a single published worked example (AusTax.tools, a hypothetical scenario working 3 days a week for 50 weeks, 1,200 hours a year), not a universal outcome. A shared, non-dedicated workspace will usually claim far less under the actual cost method than this example shows.
| Method | What's being claimed | Deduction |
|---|---|---|
| Fixed rate, 1,200 hours | 1,200 hours × 70¢, running costs only | $840 |
| Actual cost, same 1,200 hours | Electricity, gas, internet, mobile and stationery apportioned to measured work use | ~$1,437 |
Both totals exclude equipment depreciation, which is claimed the same way under either method: a $400 laptop, say, adds $400 to whichever running-cost total applies. In this example that makes it $1,240 under the fixed rate versus $1,837 under actual cost, a gap of roughly $600 that comes entirely from the running-cost side.
Which one actually wins
Actual cost wins comfortably once there's a genuine dedicated office and real running costs behind it: higher electricity or gas bills, an internet or mobile plan with a solid work-use share, and a household where nobody else is sharing the room while the work happens. The extra bookkeeping, itemised bills for every expense claimed plus a note of how each apportionment was worked out, pays for itself once those numbers get big enough.
Fixed rate wins for almost everyone else. Working from a shared space, like a kitchen table or lounge room the rest of the household still uses, produces little or nothing to claim under the actual cost method, since the ATO's own test is whether working from home caused an additional cost, not just a cost that happens to exist in that room already. Fixed rate also wins on effort alone: one hours record and one bill per expense category, against apportionment sums and receipts for every category claimed. Equipment depreciation is available either way, so a big laptop or monitor purchase in the year doesn't itself decide which method wins, that comes down to the running-cost side.
One change worth knowing about ahead of time, not for this year's return: a new $1,000 standard deduction for work-related expenses becomes available from 1 July 2026, for the 2026–27 income year, claimable with no receipts at all. It's a floor rather than a ceiling, anyone with genuinely higher work-related expenses, a WFH deduction included, can still itemise instead. It has no effect on the return being lodged for 2025–26.
Common questions
Do I need a dedicated home office to use the actual cost method?
Not as a formal rule, no, but in practice it's what makes the method worth using. The ATO's own example treats working from a shared lounge room as generating no additional running cost to claim, since nothing about the room's energy use changed because of the work happening there. A separate room used for work is what produces a real, calculable claim.
Can I claim laptop or desk depreciation under the fixed rate method?
Yes. Equipment costing over $300, a laptop, monitor, desk or chair used for work, is depreciated separately under either method; it's never folded into the 70-cent fixed rate. Items costing $300 or less can be claimed as an immediate deduction instead of being depreciated.
How many hours of records does the actual cost method need, compared to fixed rate?
Less, in one respect. The actual cost method accepts either a full year's record of hours or a continuous 4-week period that represents a normal work pattern, applied across the year. The fixed rate method is stricter here: since 1 March 2023 it has required a full-year hours record, with no 4-week shortcut allowed. Phone and internet apportionment under the actual cost method also only needs a representative 4-week diary, not a full year.
Is there a similar 'pick the ATO-correct method' decision for a work vehicle?
Yes, the closest thematic match on the site. Our cents-per-km vs logbook guide is the identical method-A-vs-method-B question applied to a vehicle deduction instead of a home-office one: a simple flat rate against an uncapped, better-documented actual-cost claim.
Sources
Actual cost method: what it covers, the energy and phone/internet apportionment examples, and record-keeping requirements, quoted directly: ato.gov.au, Actual cost method. Fixed rate method, the 70¢ rate for 2024–25 and 2025–26 and the full-year hours record requirement since 1 March 2023, quoted directly: ato.gov.au, Fixed rate method. The $300 immediate-deduction threshold and decline-in-value methods for office equipment: ato.gov.au, Office furniture and equipment. The new $1,000 standard deduction, commencing 1 July 2026 for the 2026–27 income year: ato.gov.au, Standard deduction for work-related expenses. Worked comparison example (1,200 WFH hours, apportioned running costs): AusTax.tools, Working from home: fixed rate vs actual method 2025-26. All fetched July 2026.