Work From Home Deductions for Sole Traders in Australia (2025–26)

Short answer: A sole trader can claim home running costs in one of two ways: the fixed rate method, 70 cents for every hour worked from home in the 2025–26 income year, covering energy, phone, internet and stationery but only with a record of every hour; or the actual cost method, the real business share of each bill. Rent, mortgage interest and rates are claimable only where part of your home is genuinely a place of business, and that can mean capital gains tax when you sell.

Australia’s income year runs 1 July to 30 June, so the 2025–26 income year is the one in the return most sole traders are preparing now. The rules below follow the ATO’s guidance on home-based business expenses for sole traders, which differs from the employee rules in a few places that matter. For the full list of what a sole trader can deduct, see sole trader expenses and receipts; for where the figure lands, see the sole trader tax return.

What is the ATO work from home rate for 2025–26?

The fixed rate is 70 cents per work hour for the 2025–26 income year, the same as 2024–25.

Income year	Fixed rate	Return it goes in
2024–25	70c per work hour	2025 return
2025–26	70c per work hour	2026 return
2026–27	Check the ATO before claiming	2027 return

The “work from home rate 2025” people search for is the 2024–25 figure, because a return is named after the year the income year ends. The ATO sets the rate year by year on its fixed rate method page; at the time of writing it gave the rate for 2024–25 and 2025–26 only, so check it before a 2026–27 claim.

Fixed rate or actual cost: which method should a sole trader use?

Use the fixed rate when your hours are well recorded and your bills are ordinary; use actual cost when the real business share of your bills is clearly higher and you can prove it.

	Fixed rate method	Actual cost method
What you claim	Hours worked from home × 70c (2025–26)	The business share of each running expense
Dedicated room needed?	No	No
Hours record	Every hour, for the whole income year	Full-year record, or a 4-week diary showing your usual pattern
Bills to keep	At least one bill for each expense the rate covers	Every bill and receipt, plus your calculations
Claimed on top	Equipment, furniture and their repairs	Same

Neither method needs a room set aside, so a desk in the lounge room can support a running-expense claim. The trade-off is effort: the fixed rate is one multiplication, while actual cost rewards people who run power-hungry equipment or use the phone and internet heavily for work.

What does the 70c rate cover, and what can you claim on top?

The rate replaces your claims for everyday running costs, but not for the things you work with.

The 70 cents covers, in one figure:

• home and mobile internet or data
• mobile and home phone usage
• electricity and gas for heating, cooling and lighting
• stationery and computer consumables, such as printer ink and paper

You cannot claim any of those separately once you use the rate. A common mistake is claiming 70 cents an hour and then adding the business share of the internet bill as well.

You can still claim the business-use share of depreciating assets (desk, chair, computer, monitor), repairs to them, and any running expense the rate does not include. For equipment first used or installed ready for use from 1 July 2026, the $20,000 instant asset write-off is now permanent law: a small business with aggregated turnover under $10 million can deduct each eligible asset costing less than $20,000 in the year it starts using it. Only the business-use share counts, so a laptop the family uses half the time is a half claim. For earlier purchases, check the limit that applied that year.

What records do you need for the fixed rate method?

You need a record of the actual hours you worked from home across the entire income year, plus at least one bill for each running expense the rate covers.

The hours record can be a timesheet, roster, diary or similar document, kept as you go. Because the rule is all hours for the whole year, a sample month multiplied by twelve will not do. A daily log of the date, start and finish times and hours works; if you also go out to jobs, record only the time at home.

The bills prove you actually incurred the costs the rate stands in for. The ATO’s example: if you use your phone and electricity for the business, keep one monthly or quarterly bill for each.

How do you work out the actual cost method?

You take each running expense, work out the share that relates to the business on a fair and reasonable basis, and keep the workings with the bills.

• Electricity and gas: multiply the cost per unit of power (on your bill) by the units your appliances use per hour (from the manufacturer or energy-rating label) by your total business hours for the year. If you have an area set aside for the business, the ATO accepts splitting heating, cooling and lighting by the floor-area share of the home and the share of the year you used it for business.
• Phone and internet: the business share of the bill. A 4-week diary of business use, applied across the year, is an accepted way to set the percentage, and an itemised bill is better still.
• Stationery and consumables: the receipts for what you bought for the business.

The actual cost method page sets out the energy calculation in detail.

Worked example: fixed rate vs actual cost for 2025–26

Mia is a freelance bookkeeper working from a spare bedroom. Her log shows 1,520 hours worked at home in 2025–26. The household figures below are illustrative.

Fixed rate: 1,520 hours × $0.70 = $1,064.

Actual cost:

Expense	Working	Claim
Electricity	1,520 hours × 0.9 kWh an hour × $0.33 per kWh	$451.44
Internet	$1,020 a year × 55% business (4-week diary)	$561.00
Mobile	$660 a year × 40% business (itemised bill)	$264.00
Stationery and ink	Receipts, all business	$180.00
Total		$1,456.44

Actual cost wins by $392.44 here, because Mia’s internet and phone use are heavy. It also means more paperwork and more to defend. At 2,000 hours the fixed rate would give $1,400 and the gap would nearly close. Under either method, her laptop and desk are claimed separately.

Can you claim rent, mortgage interest or council rates?

Only if part of your home has the character of a place of business, which a desk in a spare room does not.

These are occupancy expenses: rent, mortgage interest, council and water rates, land tax and house insurance premiums. The ATO allows a share only where the nature of your work requires a place of business and an area of the home is set aside and clearly identifiable as one, like a consulting room clients come to. If you work at home by choice, you claim running expenses and nothing more.

The catch is capital gains tax. Under the home-based business CGT rules, if an area is set aside exclusively as a place of business and you are able to claim occupancy expenses, you get only a partial main residence exemption when you sell. The taxable share is the percentage you could have claimed for interest, generally the floor-area share, whether or not you actually claimed. Get advice before setting a room up that way.

How is a sole trader’s claim different from an employee’s?

The rate and the records are the same, but where the claim goes and what else you can claim are not.

An employee claims at the work-related deduction questions of the individual return; a sole trader claims it as a business expense in the business section, and uses the small business depreciation rules for equipment. If you are both, an employee by day and a sole trader on weekends, split your hours and never count the same hour twice. Unsure which you are? See contractor vs employee. Trips from a home office to clients are a separate claim, covered in car expenses and cents per kilometre; the rest of the rules are in the Australian guides.

…and where does Keel fit?

Keel does not log your hours or work out the claim; keep a timesheet or calendar for that. It holds the other half of the evidence: the bills and receipts.

Keel: Invoice Maker & Receipts, by Ilura Technology OÜ, is an iPhone app for people who work for themselves. You photograph a receipt or bill and file it as an expense, under a job where that makes sense. Records stay on the iPhone: no account, no bank connection, no cloud sync, and the App Store privacy label reads “Data Not Collected”. It does not calculate tax, lodge returns or connect to the ATO. Keel is free with no invoice limit; Keel Lifetime, a one-time purchase ($249.99 USD, shown in local currency on the App Store), adds accountant-ready exports. Keel on the App Store.

Frequently asked questions

What is the work from home rate for 2025–26? The ATO’s fixed rate is 70 cents for each hour you work from home in the 2025–26 income year, the same as 2024–25. It covers energy, phone, internet, stationery and computer consumables in one figure. The ATO sets the rate year by year, so check its fixed rate page before claiming for 2026–27.

Can I claim the 70c rate and my internet bill? No. Internet, phone, electricity, gas, stationery and computer consumables are already inside the fixed rate, so claiming any of them on top is double counting. What you can add is the business share of depreciating assets such as a computer, desk or chair, plus repairs to them and any running cost the rate does not cover.

Do I need a separate home office to claim working from home? Not for running expenses. Both the fixed rate and actual cost methods work from a desk in a shared room. A room set aside only matters for occupancy expenses like rent and mortgage interest, and then it must have the character of a place of business, which also has capital gains tax consequences when you sell.

What if I didn’t record my hours? You cannot use the fixed rate without a record of all hours worked from home across the whole income year. You can fall back on the actual cost method, which accepts a representative 4-week diary to set your business-use pattern, but you then need the bills and workings for each expense. Start a daily log now for the current year.

Is there a simple work from home calculator? For the fixed rate the sum is short: total hours worked from home in the income year multiplied by the rate, 70 cents for 2025–26. For actual cost, add up the business share of each expense, using cost per unit × units per hour × business hours for energy. Compare the two and claim whichever you can support with records.

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This article is general information, not tax advice. Consult a qualified Australian tax professional.