Published: 4 March 2026 | FY 2025-26

Internet Tax Deduction Work From Home: How to Claim Your Home Office Internet Costs

With millions of Australians now working from home at least part of the week, understanding how to claim internet tax deductions has never been more important. Whether you're a full-time remote worker, splitting your time between the office and home, or running a small business from your spare room, your internet connection is likely essential for earning your income. The good news is that the Australian Taxation Office (ATO) recognises this reality and allows you to claim a deduction for the work-related portion of your home internet expenses.

Many Australian workers are missing out on valuable tax deductions simply because they're unsure about the rules for claiming home internet costs. Others make mistakes by claiming too much or too little, potentially attracting unwanted ATO attention or leaving money on the table. This comprehensive guide explains everything you need to know about internet tax deductions for the 2025-26 financial year, including the different calculation methods, record-keeping requirements, and how these deductions fit into your overall tax position. To understand how work-from-home deductions could improve your finances, try our take-home pay calculator before we explore the details.

Can You Claim Internet Expenses When Working From Home?

The short answer is yes—if you use your home internet connection for work purposes, you can claim a deduction for the work-related portion of your expenses. This applies to employees, freelancers, contractors, and business owners. The key principle is that you can only claim the percentage of your internet costs that relates directly to earning your assessable income.

Work-related internet use includes activities such as accessing work emails and cloud-based documents, participating in video conferences and virtual meetings, researching information for your job, using work-related software and applications, uploading or downloading work files, and communicating with colleagues, clients, or suppliers. If your employer requires you to be available online for after-hours support or on-call duties, that usage also counts as work-related.

However, you cannot claim any portion of your internet use that is private. This includes streaming movies and TV shows for entertainment, browsing social media for personal reasons, online gaming, video calls with family and friends, and general personal browsing. The ATO expects you to apportion your internet expenses appropriately between work and private use, and you must be prepared to demonstrate how you calculated this split if asked.

ATO Methods for Claiming Work-From-Home Expenses

The ATO provides several methods for claiming work-from-home expenses, and the method you choose affects how you calculate your internet deduction. Understanding these options helps you select the approach that maximises your legitimate claims while keeping record-keeping manageable.

The Revised Fixed Rate Method: For the 2025-26 financial year, the ATO allows you to claim 67 cents per hour for each hour you work from home. This rate covers electricity, gas, stationery, computer consumables, and the decline in value of office furniture. Importantly, it does not include internet costs—so if you use this method, you can claim your internet expenses separately using the actual cost method described below. This often provides the best outcome for those with significant work-related internet use.

The Actual Cost Method: Under this method, you calculate the actual expenses you incur while working from home. This includes electricity, gas, cleaning, and importantly, your internet costs. To use this method for internet, you must determine your work-related percentage and apply it to your actual internet bills. This requires more detailed record-keeping but can result in larger deductions, especially if you have a high-speed, high-cost internet plan and significant work usage.

The Shortcut Method: During the COVID-19 pandemic, the ATO introduced an 80 cents per hour shortcut method that covered all work-from-home expenses including internet. However, this method ended on 30 June 2022 and is no longer available for the 2025-26 financial year. If you've used this method in the past, you'll need to switch to either the revised fixed rate or actual cost method going forward.

How to Calculate Your Work-Related Internet Percentage

To claim your internet expenses, you need a reasonable basis for calculating what percentage of your usage is work-related. The ATO accepts several approaches depending on your circumstances:

Data usage analysis: If your internet provider offers detailed data usage reports, you can analyse your work-related data consumption. This might include identifying work-related devices (like your work laptop) or tracking data usage during work hours. Some routers allow you to monitor usage by device, which can help establish your work-related percentage. Keep records showing how you determined this percentage.

Time-based apportionment: For many workers, a time-based approach is practical. If you work from home 40 hours per week and your internet is used fairly consistently throughout the day, you might calculate your work percentage based on hours. For example, if you're awake and using the internet for 16 hours per day on average, and you work 8 of those hours, your work-related percentage would be 50%. However, this assumes your work and personal usage patterns are similar, which may not always be the case.

Representative period diary: The ATO recommends keeping a four-week diary to establish your typical work-related internet usage. Record the time you spend online for work versus personal purposes each day. This diary can then be used to calculate your work-related percentage for the entire financial year, provided your usage patterns remain consistent. If your circumstances change significantly—such as starting a new job with different internet requirements—you should keep a new diary.

What Internet Expenses Can You Claim?

Once you've determined your work-related percentage, you can apply it to various internet-related expenses. For the 2025-26 financial year, the following costs are typically deductible to the extent they're work-related:

Monthly internet plan fees: Your ongoing NBN, cable, ADSL, or wireless internet plan costs can be claimed based on your work-related percentage. This includes the base monthly fee plus any excess data charges that were work-related. If you upgrade your plan specifically for work reasons—for example, to get faster speeds for video conferencing—the entire upgraded cost can be apportioned, not just the difference.

Modem and router costs: If you purchase a modem or router to support your work-from-home setup, you may be able to claim the work-related portion. Equipment costing $300 or less can be claimed as an immediate deduction. More expensive items must be depreciated over their effective life (typically 3-5 years for networking equipment), with the work-related portion claimed each year.

Wi-Fi extenders and mesh systems: If you need to improve your home Wi-Fi coverage specifically for your work area, the cost of Wi-Fi extenders or mesh network systems may be deductible. As with modems, items under $300 can be claimed immediately, while more expensive systems should be depreciated.

Mobile broadband and tethering: If you use mobile broadband or tether your phone for work when your home internet is unavailable, these costs can be claimed. This includes dedicated mobile broadband plans and excess data charges incurred for work purposes. For guidance on claiming mobile phone expenses, see our mobile phone tax deduction guide.

Record-Keeping Requirements for Internet Deductions

Good record-keeping is essential for substantiating your internet deduction claims. The ATO can review your claims for up to five years after you lodge your tax return, so maintaining proper documentation is crucial for compliance.

Keep all your internet bills for the financial year, whether they're monthly NBN statements or quarterly invoices. Electronic copies are acceptable, so saving PDFs or screenshots is fine. If you're claiming under the actual cost method alongside the revised fixed rate method, keep records of your work-from-home hours (such as a timesheet, diary, or roster) in addition to your internet bills.

If you use the diary method to establish your work-related percentage, retain your four-week representative diary alongside your calculation showing how you determined the percentage. The diary should show dates, hours worked, and notes about your internet usage patterns. If your circumstances change during the year—perhaps you start working from home more frequently—consider keeping an updated diary to reflect the new pattern.

For equipment claims like modems and routers, keep purchase receipts showing the date and cost. If you're depreciating an asset, maintain a schedule showing your depreciation calculations each year. The ATO's myDeductions tool in the ATO app can help you track expenses throughout the year, making tax time much easier.

Combining Internet Claims With Other Work-From-Home Deductions

Internet expenses are just one component of work-from-home deductions. Understanding how they interact with other claims helps you maximise your total deduction while staying within ATO guidelines.

If you use the revised fixed rate method (67 cents per hour), you can claim this for electricity, gas, stationery, computer consumables, and furniture depreciation. Then, separately, you can claim your internet costs using the actual cost method. You can also claim depreciation on office equipment like computers, monitors, and printers separately. This combination often yields the best result for many workers.

Other work-related deductions you might claim alongside internet include mobile phone expenses, the cost of home office furniture, computer equipment and software, stationery and office supplies, and professional subscriptions. If you're unsure what else you can claim, our guide on what you can claim on tax provides a comprehensive overview.

Remember that if you have a HECS-HELP debt, claiming work-from-home deductions including internet won't reduce your compulsory repayment amount. The ATO calculates HECS repayment income by adding back certain deductions to your taxable income. Similarly, the Medicare Levy Surcharge uses income thresholds that don't account for these deductions.

How Internet Deductions Affect Your Tax Position

Understanding how internet and other work-from-home deductions impact your overall tax helps you make informed decisions. These deductions reduce your taxable income, which in turn reduces the amount of income tax you pay. The exact value depends on your marginal tax rate.

For the 2025-26 financial year, Australia's individual income tax rates are as follows:

Note: The above rates do not include the 2% Medicare levy, which also applies to most taxpayers. Higher income earners may also pay the Medicare Levy Surcharge without private health insurance.

As the table shows, the tax savings from a $400 internet deduction range from $0 to $180 depending on your income level. While this may seem modest, remember that work-from-home deductions are cumulative. When you combine internet with other eligible expenses—such as home office equipment, stationery, and phone costs—your total deductions can deliver meaningful tax savings.

For higher-income earners, combining internet deductions with salary sacrifice arrangements for additional superannuation contributions can be an effective tax minimisation strategy. However, as mentioned earlier, salary sacrifice doesn't reduce HECS repayment income, so factor this into your planning.

Common Mistakes to Avoid When Claiming Internet Expenses

The ATO closely monitors work-related expense claims, and internet deductions are no exception. Avoid these common mistakes to stay compliant and reduce the risk of an audit:

Claiming 100% without justification: Unless you have a dedicated business internet connection used exclusively for work, claiming 100% of your home internet costs is likely to raise red flags. Most households use the internet for entertainment, personal communication, and other non-work activities. Be realistic about your work percentage and keep records to support your claim.

Double-dipping with employer reimbursements: If your employer provides an internet allowance or reimburses your home internet costs, you cannot claim those same expenses as deductions. The allowance is taxable income, and you can only claim actual out-of-pocket expenses. Check your pay slips and employment agreement to understand what arrangements are in place.

Using outdated methods: The shortcut method (80 cents per hour) that included internet is no longer available. Make sure you're using either the revised fixed rate method (67 cents per hour, which excludes internet) or the actual cost method. If using the fixed rate method, claim internet separately using actual costs.

Poor record-keeping: Simply estimating your work-related percentage isn't sufficient. The ATO requires evidence of how you calculated your claim. Keep a four-week diary, usage reports, or time records that demonstrate your methodology. Update these records if your work patterns change significantly.

Claiming personal streaming services: While you might need Netflix or Spotify for background entertainment while working, these subscriptions are not deductible. Similarly, you cannot claim the cost of streaming services you use during work hours for personal entertainment, even if you're "at work" in your home office.

Special Considerations for Different Work Arrangements

Different employment situations present unique considerations for internet deductions. Understanding these nuances helps you claim correctly and maximise your refund.

Hybrid workers: If you split your time between the office and home, you can only claim internet for the days you work from home. Keep a record of your work-from-home days, such as a calendar or diary, to support your claim. If your employer requires you to work from home on certain days, document this requirement.

Self-employed and small business owners: If you run a business from home, you have more flexibility in structuring your internet arrangements. Consider whether a dedicated business internet connection makes sense for your situation. While this means paying for two connections, it simplifies record-keeping and allows 100% deductibility of the business connection. You may also be eligible for the small business instant asset write-off for equipment purchases.

Employees with employer-provided equipment: If your employer provides a laptop, phone, or other devices with their own internet connectivity (such as a 4G/5G laptop), your personal home internet use for work may be reduced. Ensure your claimed work-related percentage accurately reflects your actual usage of personal internet resources.

Multiple income earners in one household: If multiple people in your household work from home and use the same internet connection, each person can claim their work-related portion. However, the total work-related percentage claimed by all household members cannot exceed 100%—if together you use 60% of the internet for work, that's the maximum total claim between all earners.

Maximising Your Internet Tax Deduction

Smart strategies can help you maximise legitimate internet deductions while staying compliant. Consider these approaches for the 2025-26 financial year:

Start by keeping detailed records from 1 July. Don't wait until May or June to think about your deductions. Begin a four-week diary early in the financial year to establish your baseline work-related percentage. If your work patterns change during the year—perhaps you negotiate a new flexible working arrangement—keep a fresh diary to capture the updated usage.

Review your internet plan to ensure it suits your work needs. If you're consistently experiencing slow speeds or dropouts that affect your productivity, upgrading to a faster plan may be worthwhile—and the entire cost remains deductible at your work-related percentage. Keep records of any work-related issues that prompted the upgrade in case the ATO questions the change.

Consider the interaction between your internet and mobile phone usage. If you frequently tether your phone for work when your home internet is down, both your home internet and mobile phone expenses may be deductible. Our mobile phone tax deduction guide explains how to claim phone expenses alongside your internet costs.

Finally, remember that internet deductions work alongside other tax strategies. If you're making additional superannuation contributions, salary sacrificing, or claiming other work-related expenses, consider how these interact to optimise your overall tax position. Our income tax calculator can help you model different scenarios.

Summary: Key Takeaways for Internet Tax Deductions

Internet tax deductions offer Australian workers a valuable opportunity to reduce their taxable income when working from home. For the 2025-26 financial year, remember these essential points:

• You can claim the work-related portion of your home internet expenses if you work from home
• The revised fixed rate method (67 cents per hour) does not include internet—claim it separately using actual costs
• Keep a four-week representative diary or use data analysis to calculate your work-related percentage
• Maintain all internet bills and supporting records for at least five years
• Equipment under $300 can be claimed immediately; depreciate more expensive items over their effective life
• Internet deductions reduce taxable income but don't reduce income for HECS-HELP repayment calculations
• If your employer reimburses internet costs, you cannot claim them as deductions

Understanding how internet deductions fit into your overall tax picture helps you make informed decisions throughout the financial year. By keeping proper records, claiming only what you're entitled to, and understanding the interaction between deductions and other tax obligations, you can maximise your refund while staying fully compliant with ATO requirements.

To estimate how internet and other work-from-home deductions could affect your tax position, use our income tax calculator and take-home pay calculator. These free tools help you understand your tax liability, explore different deduction scenarios, and plan your finances for the 2025-26 financial year.