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;
- 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;
- 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.
Refer to our 2026 work-related expense worksheet for more detail.
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 is 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.
