Take care when claiming occupancy expenses for work from home (August 2026)

The ATO has found that some taxpayers are incorrectly claiming rent, mortgage interest and other
occupancy costs as part of their working from home expenses. The key to getting it right is
understanding the difference between running expenses and occupancy expenses, and what you’re
eligible to claim.

Running expenses are the extra costs you incur working from home. These can include costs for
heating, cooling or lighting; internet or data; phone costs; stationery; computer consumables; and
the decline in value of office furniture or equipment not provided by your employer. You can’t claim
expenses that have been reimbursed by your employer.

Occupancy expenses are the costs of owning or renting your home. These include mortgage interest,
rent, council and water rates, land tax and house insurance premiums.

Employees can generally claim running expenses if they work from home to perform their
substantive employment duties (not just answering a few emails or taking phone calls), incur
additional costs as a result, and keep records to support the claim. There are two ways to calculate
the deduction: the fixed rate method and the actual cost method.

Occupancy expenses are rarely deductible for employees. To claim occupancy expenses, you
generally need to show that your home work area has the character of a place of business.

If you’re eligible to claim occupancy expenses, you must apportion them (which means calculating
amounts related to private use versus work use) and only claim the work portion. This is generally
based on the floor area used for work; the period the area was used for work; and your ownership
or share, if the property’s jointly owned or the rent’s shared. There may also be capital gains tax
consequences for occupancy expenses when using part of your home as a business premises.