Running a home-based business in Australia entitles you to claim a broader range of tax deductions than an employee working from home. If your home is your principal place of business — with a dedicated area used exclusively or primarily for business — you can claim a proportional share of occupancy costs, including mortgage interest or rent, rates, insurance, and repairs. Here is what home-based business owners can claim in 2026.
Home-Based Business vs Working From Home: A Critical Distinction
The ATO draws a sharp line between employees who occasionally work from home and genuine home-based businesses. If your home is your principal place of business and you have a dedicated business area not used for private purposes, you qualify for the full range of home-based business deductions. Employees working from home are limited to the 70-cent fixed rate method or actual running costs — not occupancy expenses.
What Can Home-Based Businesses Claim in 2026?
Occupancy Expenses (Proportional Claim)
Calculate the business-use proportion as: business area floor space / total home floor space. Apply this percentage to:
- Mortgage interest (not the principal repayment itself)
- Rent (for renters)
- Council rates and land tax
- Home insurance premiums
- Repairs and maintenance for the whole property
Running Expenses
- Electricity and gas (business-use proportion)
- Internet and phone (business-use proportion)
- Cleaning of the home office area
- Depreciation on business equipment (computers, printers, desks, chairs)
- Business stationery and consumables
Other Deductible Business Costs
- Professional development and training directly related to your business
- Business registration and licensing fees
- Accountant and bookkeeper fees
- Business insurance premiums
- Advertising and marketing costs
- Depreciation of motor vehicles used for business (logbook method recommended)
The CGT Warning for Home-Based Businesses
Claiming occupancy expenses (mortgage interest, rent, rates) against your home-based business creates a partial CGT liability when you eventually sell your home. The ATO apportions your main residence CGT exemption based on the percentage of your home used for business and the period of business use. This is one of the most important — and often overlooked — consequences of home-based business deductions. Always model the long-term CGT impact before claiming occupancy costs.
Record-Keeping Requirements
- Floor plan or measurement of the home office area vs total home
- All receipts for mortgage interest, rates, insurance, utilities
- Diary of hours worked and nature of business activity
- Photos of the dedicated business area
- Records retained for 5 years from date of lodgement
Frequently Asked Questions
Can I claim rent as a home-based business expense?
Yes, if your home is your principal place of business and you have a dedicated work area, you can claim the business-use proportion of your rent. However, this reduces your main residence CGT exemption, so calculate the long-term impact carefully.
How do I calculate home office floor space?
Measure the square metres of your dedicated business area and divide by the total floor area of your home (including garages if part of the main structure). For example, a 15 sqm office in a 150 sqm home gives a 10% business-use proportion for occupancy expenses.
Do I need a separate room for a home-based business?
For occupancy expense claims, yes — the ATO requires a clearly defined, dedicated area used exclusively or almost exclusively for business. For running expense claims (electricity, phone, internet), a dedicated area is not required but is strongly recommended for audit defence.
Running a business from home and unsure what you can claim? Contact AWTS for a review of your home-based business deductions.
