Working from home and car deduction rates: what applies in 2026-27

PCG 2023/1 sets the fixed rate method at 70 cents per hour, up from 67 cents on 1 July 2024. The guideline has not been superseded — there is no successor PCG — and the consolidated version dates from 16 April 2025.

A note on the current year: the ATO has not published a rate specific to 2026-27. The 70 cent rate carries forward under the unamended guideline. Confirm before lodging in case the ATO issues an update.

The rate covers energy, internet, mobile and home phone, stationery, and computer consumables. Claiming any of those separately on top of the fixed rate is double dipping, and the ATO flags it as an error. The mobile phone inclusion is the one clients most often miss.

The fixed rate does not absorb everything. Separately claimable items include the decline in value of assets such as a desk, chair or computer; repairs and maintenance to those assets; and the cleaning of a dedicated home office.

Occupancy costs — rent, mortgage interest, rates, house insurance — are not claimable under the fixed rate method, and for most employees are not claimable at all.

The transitional arrangement that allowed a four-week representative diary ended on 28 February 2023. From 1 March 2023, a taxpayer using the fixed rate method must keep a record of the total number of hours worked from home across the entire income year, and the record must be contemporaneous — kept as the hours are worked, not reconstructed at year end.

A number of blogs and even some practitioner-facing content still state that a four-week diary is sufficient. It is not, under the fixed rate method. A representative period remains acceptable under the actual cost method, which is a different calculation altogether.

The cents per kilometre rate is set by legislative instrument and has moved for the current year:

The 2026-27 rate of 91 cents comprises an indexed base of 89 cents plus a one-off uplift of 2 cents that applies to 2026-27 only. Future indexation applies to the 89 cent base, so the rate should not be extrapolated forward from 91 cents when modelling later years.

The 5,000 kilometre cap applies per car, per year. The rate is all-inclusive — it covers running costs and depreciation, so nothing further can be claimed for the same vehicle under this method. The logbook method remains the alternative: 12 continuous weeks of records, valid for five years.

Under section 900-35, where total work-related expenses are $300 or less, written evidence is not required. Two qualifications matter. The taxpayer must still have actually incurred the expense and be able to show how the claim was calculated — it is not a free allowance. And the threshold is all-or-nothing: exceed $300 and written evidence is required for the whole amount, not just the excess.

The separate $150 laundry limit in section 900-40 covers washing, drying and ironing only — not dry-cleaning. It does not combine with the $300 threshold to create a $450 limit, which is a persistent misconception.

Work-related expenses, rental deductions and omitted income remain the standing focus areas. For 2026-27 the ATO has added tax misinformation, copy-pasting prior year returns without review, and taxpayers wrongly claiming the $1,000 work-related deduction, which is not available until 2027.

One further change worth noting in planning: general interest charge and shortfall interest charge incurred from 1 July 2025 is no longer deductible.

This article is general information for registered practitioners. Confirm current-year rates before lodging.