Eligibility to claim
To claim occupancy expenses when you work from home, you must show that:
- it was necessary for you to work from home because your employer doesn't provide you with an alternative place to work from
- the area of your home that you use for work is exclusively or almost exclusively used for work purposes and isn't readily capable of being used for any other purpose.
Occupancy expenses include:
- mortgage interest
- rent
- council and water rates
- land taxes
- house insurance premiums.
As an employee working from home, generally:
- you can't claim occupancy expenses
- there are no capital gains tax (CGT) implications for your home.
Calculate your occupancy expenses
Occupancy expenses can generally be apportioned on a floor area basis. You must also apportion your expenses on a time basis if you only use that area of your home for work purposes for part of the year.
Example: occupancy expenses deductible
Abdul works for a statutory authority in Brisbane who permanently closed all their offices at the end of January 2022. From 1 February 2022, Abdul sets aside a room in his house for his work with the statutory authority. The floor area of the room is 10% of the floor area of the whole house.
His employer provides him with the equipment necessary to fulfil his work functions and they pay for a work, health and safety check on the room he uses for working at home.
Abdul doesn’t use the room for non-work purposes. Abdul can claim a deduction for occupancy expenses relating to working from home for 5 months of the year because:
- his employer doesn't provide him with a work location
- it is necessary for him to work from home
- the room he uses is used exclusively for work purposes.
Abdul's occupancy expenses for the 2021–22 income year are $24,918. That is:
- mortgage interest $19,524
- council and water rates $4,259
- home insurance $1,135.
Abdul calculates his deduction for occupancy expenses as follows:
Total occupancy expenses × floor area percentage × time used for work purposes
$24,918 × 10% × (5 months ÷ 12 months) = $1,038.
As Abdul can claim mortgage interest expenses as a deduction, he will be required to pay tax on any capital gain he makes when he sells his home. He can't claim the full main residence exemption.
End of exampleRecord keeping for occupancy expenses
You must keep records for all of your occupancy expenses, including:
- bank statements for your mortgage interest
- rental receipts
- quarterly invoices for your water and council rates
- invoices or receipts for your house insurance
- land tax assessment notices and evidence of payment
- a floor plan of your home with the floor area used when working from home clearly marked
- records of time spent using the area for a purpose other than working from home
- records showing how you apportioned your occupancy expenses.
There may be CGT implications when you sell your home, if you can claim occupancy expenses. Find out more about how your home may be affected if you use your home in earning your income.
You must keep records for the property, including:
- the purchase and sale contract for your home
- records of any incidental expenses you incur on the purchase and sale of your home – for example, real estate agent commission and stamp duty
- records of the occupancy expenses for every year you claim them.
If you start using a part of your home for income producing purposes sometime after you buy it and you're eligible to claim a deduction for interest expenses, you won't be eligible for the full main residence exemption. It doesn't matter whether you actually had a home loan or whether you claimed a deduction for interest, your main residence exemption will still be affected. However, there are special rules around the cost of your home in these circumstances. As such, you should get a market valuation for your house at the time you first start using it for income producing purposes.
These records must be kept for the entire period that you own your home and for 5 years after you sell it.
Check if you're eligible to claim occupancy expenses when you work from home because there is no alternative workplace.