Quick answer
Internet is deductible at the work-use percentage, or it is inside the working-from-home fixed rate of 70 cents per hour, never both. Actual-cost claims need a 4-week representative record of work versus household use, with bundled plans split into their services first. Businesses claim GST credits on the business share; a dedicated office connection is claimable in full.
Is internet tax deductible in Australia?
Yes, and the first decision is the method, because it controls everything else. Anyone claiming working-from-home costs picks between the fixed-rate method and the actual-cost method for the year. The fixed rate, 70 cents per work hour for 2025-26 (the 2026-27 rate is set by the ATO and should be confirmed before lodging), bundles internet and data with phone, energy, and stationery; choose it and the home internet bill is not separately claimable. The actual-cost method claims the real bills at the work percentage but requires the record set to match: a continuous 4-week diary representative of the year, and evidence for every cost.
The apportionment itself is household-wide. The ATO expects work data as a share of everyone’s data, or work hours online against the household’s total use, to drive the percentage. A home-based business (a sole trader running the operation from the spare room) applies the same logic, though its claim runs through the business schedule rather than employee deductions, and pairs with the wider home office claim.
How much can you claim?
Worked example: a freelance developer pays $85 a month for home fibre. Over a 4-week representative period, work traffic (deploys, remote sessions, video calls) accounts for 45% of the household’s data, shared with a partner who streams heavily. The annual claim is $85 x 12 x 45%, which is $459 under the actual-cost method. Had she claimed the fixed rate for her 1,800 home-working hours instead (1,800 x 70c = $1,260 covering internet, phone, energy, and stationery together), the internet bill itself would claim nothing extra.
That comparison is the real decision every year: heavy home-working hours with modest bills tend to favour the fixed rate; expensive connections, high work shares, or big energy costs tend to favour actual cost. Run both numbers before choosing.
| Situation | Treatment |
|---|---|
| Fixed-rate method chosen | Internet inside the 70c/hour; no separate claim |
| Actual-cost method | Work percentage of bills, 4-week record required |
| Dedicated business connection (office or shopfront) | Fully deductible, full GST credit |
| Bundled phone and internet plan | Split services first, then apportion each |
GST on internet costs
A GST-registered business claims the input tax credit on the business share of the connection. An office connection is straightforward: full credit, coded GST on Expenses. A home connection claimed by a sole trader carries a credit only on the business percentage, and the BAS claim should mirror the income tax apportionment. Employees claiming deductions get no GST credits; theirs is an income tax claim only.
Record-keeping requirements
Keep the bills, the plan contract, and the 4-week representative record for five years. Under the fixed-rate method, the critical record changes shape: you need a full-year record of actual hours worked from home (a timesheet, roster, or diary; estimates are not accepted) plus one bill for each cost category the rate covers, internet included, to prove you incurred it. Under actual cost, you need the usage record and every bill you claim.
How to claim, step by step
- Choose the method for the year: fixed rate (70c/hour, internet included) or actual cost (apportioned bills).
- For actual cost, keep a continuous 4-week record of work versus household use and set the percentage.
- Split any bundle into services first, using the supplier’s breakdown, and apportion the internet service on its own.
- Apply the percentage to 12 months of bills and claim at the work-related or business expenses label.
- For the fixed rate, log actual home-working hours all year and multiply by the rate at lodgment.
- Businesses claim the GST credit on the business share via the BAS and keep records five years.
Common mistakes
- Claiming the fixed rate and the internet bill for the same hours.
- Ignoring the rest of the household when setting the work percentage.
- One blended percentage across a phone-and-internet bundle.
- Estimating home-working hours instead of keeping the required record.
- Business percentage on the BAS not matching the income tax claim.
Software that helps
- ATO myDeductions keeps the hours log and the usage diary in one place for individuals.
- ExpenseFlow captures the provider bill each month, applies the business-use split you configure and the GST treatment to the claimable share, and syncs it to Xero or QuickBooks with the bill attached.
- Hubdoc fetches provider bills automatically so the 12-month evidence trail is complete at lodgment.
FAQ
See the answered questions above for the fixed-rate interplay, the 4-week record, household use, bundles, and GST.
From ExpenseFlow
GST coding on autopilot
ExpenseFlow reads every receipt, assigns the right GST treatment and account code, and syncs to Xero or QuickBooks Online once you approve.