Fixed Rate vs Actual Cost: Which WFH Method Pays More?

What’s the difference between the fixed rate and actual cost methods?

The fixed rate method pays a set 70c for every hour worked from home, while the actual cost method claims the real work share of each running cost. Both are for the same thing: the extra running costs of working from home as an employee.

The rules for each are on the ATO’s fixed rate method and actual cost method pages, and the fixed rate is set out in PCG 2023/1.

Which WFH method pays more?

The actual cost method pays more only when the work share of your energy, phone, internet and stationery comes to more than 70c for each hour you work from home. For most people it doesn’t, or not by enough to be worth the extra records.

The fixed rate is an average. Your own costs depend on things the rate can’t see: how you heat and cool the room you work in, your energy tariff, how much you use your phone for work, and whether anyone else at home is using the same space. The more of those that push your costs up, the more likely the actual cost method is to come out ahead.

The only way to know is to work out both. Calculate the fixed rate figure from your hours, then work out the actual cost figure following the ATO’s actual cost method page, which explains how to work out the work share of each expense.

How does the fixed rate method work?

You multiply the hours you worked from home in the year by 70c, then add any equipment depreciation and repairs. The ATO’s example is 843 hours × 70c = $590.10, claimed as $590 (ATO).

The 70c covers energy (electricity and gas), phone (mobile and home), internet, and stationery and computer consumables (ATO). You need a record of the actual hours you worked from home for the whole year, kept at the time, and at least one bill for each of those running costs, plus a receipt for stationery (PCG 2023/1, paras 56–62). The full rules are in the 70c fixed rate method explained.

How does the actual cost method work?

You work out the actual extra cost of each running expense because you worked from home, and claim the work share. That means a separate calculation for energy, phone, internet, stationery and any other running cost you claim (ATO).

• Energy. The ATO suggests working it out from the cost per unit on your bill and the energy you use for work, for example the power drawn by the equipment and heating or cooling you use while working.
• Phone and internet. The work share of each bill, worked out from a record of your work use, such as a representative 4-week period.
• Stationery and consumables. The work share of what you buy.
• Cleaning. Only if you have a dedicated home office, apportioned for any private use.

Two eligibility points catch people out. You must actually incur additional running expenses, and the ATO says you don’t incur extra running costs when other people at home who aren’t working are in the same room as you. And you can’t claim anything your employer has reimbursed.

The records are the real cost of this method. You need every bill and receipt for the costs you claim, a record of your hours worked from home, and records showing how you worked out each work share. The ATO doesn’t publish a single worked example that would apply to you, because every household’s numbers differ.

What can you claim on top under either method?

Under both methods you can claim the decline in value of equipment and furniture you use for work, such as a desk, chair, computer or monitor, and repairs to them. Claim only the work-use share (ATO).

An item that costs $300 or less can generally be claimed in full in the year you buy it, if it meets the tests on the ATO’s assets costing $300 or less page, including that you use it mainly for your work and it isn’t part of a set costing more than $300. Dearer items are claimed over their effective life. So equipment doesn’t decide the method: it’s the same either way. See what the 70c covers, and what you can claim on top.

What records does each method need?

The fixed rate method needs fewer records, but the hours record is strict: actual hours for the whole year, kept at the time. The actual cost method needs more records of every kind.

Either way, keep everything for 5 years from the date you lodge (ATO: records you need to keep). A record of your hours is the base of both methods. WFH Diary records the hours your Mac is in use as they happen, and you confirm each day was at home, so you have actual hours whichever method you choose. For the options, see what records the ATO accepts for WFH hours and bills to keep for the fixed rate method.

Does the $1,000 standard deduction change the choice?

Yes, for smaller claims. From 2026–27 you get an automatic $1,000 standard deduction for work expenses, reduced by what you itemise, so in effect you get the higher of $1,000 or your itemised work expenses (ATO).

If neither method, plus your other work expenses, gets you past $1,000, the choice between them doesn’t matter for that year. If one of them does, you need records for the full amount you claim. At 70c an hour with nothing else to itemise, the fixed rate passes $1,000 at about 1,429 hours. The $1,000 standard deduction vs the WFH fixed rate guide and the deduction calculator show where you land.

When do you have to choose a method?

You choose when you prepare your return, not at the start of the year. Whichever method you use, you can’t claim a cost the 70c already covers, such as a share of your internet bill, on top of the fixed rate (ATO).

Because you don’t have to decide until you lodge, the safe approach is to keep the hours record all year and keep your bills. That keeps both methods open. For everything else about WFH claims, start with the work from home tax deductions guide.