Tax for Australians · PUBLISHED 01 SEPT 2026 · VERIFIED 01 SEPT 2026 · AU EDITION

SOPHIE EXPLAINS: The $1,100 Work-From-Home Tax Trap (and How to Avoid It)

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A full-time employee working from home 38 hours a week for 2025–26 can claim only $1,383.20 under the ATO’s 70c-per-hour fixed-rate method, which means the “WFH deduction” is far smaller than many Australians expect.

The number that matters

The central number is $1,000: from 1 July 2026 for the 2026–27 income year, eligible Australian tax residents can access a standard deduction for work-related expenses of up to $1,000 under new law, instead of claiming each expense individually.

How it quietly costs you

The first money leak is that the ATO only lets you claim working-from-home deductions if you incur additional running expenses, work from home to do your employment duties, and keep records proving the costs.

Under the current fixed-rate method, the deduction is 70 cents per hour for 2025–26, so the claim rises only with documented hours, not with a flat entitlement to all home-office costs.

The “old vs better” comparison is that the fixed rate was 67 cents per hour before it became 70 cents per hour, a small increase that still requires detailed hour records and supporting evidence.

The second, compounding trap

The second layer is that many people try to claim private or mixed-use costs, but the ATO says you can only deduct the work-related portion of an expense and must apportion private use.

That matters because the ATO is moving to a $1,000 standard deduction from 2026–27, which means claims under that amount may become irrelevant if the standard amount exceeds your actual work expenses; the deduction is reduced by other work-related claims and is not added on top.

In practical terms, a worker who only has a few hundred dollars of genuine expenses could end up with the same total deduction as someone who claims nothing, because the standard deduction sets a floor of up to $1,000 rather than a reward for every receipt.

What this looks like in practice

Mia, 34, is a Sydney-based marketing coordinator earning $92,000 a year, working from home about 3 days a week, with roughly 1,000 WFH hours in 2025–26 and small actual expenses on her home internet, electricity, and stationery.

She would discover:

• The ATO’s fixed-rate method gives her only $700 for 1,000 hours at 70c per hour, not a blanket home-office deduction, and she must keep records of the hours worked.

• If she had previously assumed the older rate applied, the difference is only $30 per 1,000 hours versus the former 67c rate, which shows how limited the rate increase really is.

• From 2026–27, the $1,000 standard deduction may be more valuable than itemising smaller costs, because the new deduction applies automatically and her own work-related claims reduce, rather than stack onto, that amount.

The full cost of doing nothing

For Mia, the combined effect of Problems 1 and 2 is that the difference between a poorly documented claim and a well-chosen method can be about $1,000 in deduction value, because the new standard deduction caps the accessible benefit at up to $1,000 for eligible taxpayers from 2026–27.

On the current fixed-rate method, a typical full-time WFH pattern of 38 hours a week produces only $1,383.20 a year at 70c per hour, so the long-run cost of misunderstanding the rules is missing the correct method and under-claiming relative to actual eligible expenses.

The modelling basis here is a full-time pattern of 1,000 hours a year, fixed-rate claiming at 70c per hour, and the new $1,000 standard deduction from 1 July 2026.

What to do about it

• Check your eligibility and record-keeping against the ATO’s working-from-home rules using the ATO’s official working-from-home expenses guidance; look for the sections on employment duties, additional running expenses, and records.

• Confirm you are doing actual employment duties from home.

• List each expense you think is deductible.

• Verify you have receipts, bills, or a contemporaneous diary/timesheet.

• Good looks like having evidence for both hours worked and the expenses claimed.

• Calculate whether the fixed-rate method or actual-cost method is better using the ATO’s working-from-home and myTax deduction instructions.

• Count your total WFH hours for the income year.

• Multiply by 70c for 2025–26.

• Compare that result with your actual eligible running costs.

• Good looks like choosing the method that gives the larger lawful deduction, with records to prove it.

• Prepare for the $1,000 standard deduction from 2026–27 using the ATO’s standard-deduction legislation page.

• Check whether you are an eligible Australian tax resident.

• Estimate your genuine work-related expenses for the year.

• Compare your expected actual claim with the automatic up to $1,000 amount.

• Good looks like knowing whether itemising beats the standard deduction before lodgment.

A myth worth clearing up

Myth: Working from home automatically gives you a large tax deduction.

Fact: The ATO requires you to have genuine work-from-home duties, extra running expenses, and records; under the fixed-rate method, the claim is only 70c per hour for 2025–26, and from 2026–27 eligible taxpayers may instead receive an automatic up to $1,000 standard deduction.

Sources

• {“label”:“WFH fixed rate”,“value”:70,“unit”:”%”,“applies_to_year”:“2025-26”,“source_url”:“https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/working-from-home-expenses”,“status”:“in_effect”},
• {“label”:“Standard work-related deduction”,“value”:1000,“unit”:”$”,“applies_to_year”:“2026-27”,“source_url”:“https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/standard-deduction-for-work-related-expenses”,“status”:“in_effect”},
• {“label”:“Example annual deduction at 1,000 hours and 70c”,“value”:700,“unit”:”$”,“applies_to_year”:“2025-26”,“source_url”:“https://www.ato.gov.au/api/public/content/0-b7755b71-423a-413f-8ea9-0cf06cf2857a”,“status”:“in_effect”},

Researched 2026-09-01.

Corrections & disclosure: an AI-assisted, human-reviewed guide. Every figure is dated and sourced above. Spot something out of date or wrong? Tell us and we’ll correct it — corrections are noted here and in the video description.