What is the difference between running expenses and occupancy expenses?

Running expenses are the extra costs of using your home for business — electricity, heating, cooling, lighting, cleaning a work area, internet, phone, stationery, computer consumables, office furniture and depreciation of office equipment. Occupancy expenses are the costs of owning, renting or occupying the home itself — rent, mortgage interest, council rates, land tax and house insurance. Running expenses are far more common and much less sensitive.

When can an ABN worker claim occupancy expenses?

Occupancy expenses usually require the home area to have the character of a place of business. Indicators include an area that is clearly identifiable as a place of business, not readily suitable for private use, used exclusively or almost exclusively for business, used regularly for client or customer visits, and where the business is genuinely run from that area. A spare room used for business admin may not qualify; a home salon with separate client access may be different.

Does claiming home office expenses affect capital gains tax?

It can. Claiming occupancy expenses may create capital gains tax consequences when you sell your home, because part of the property has been treated as business premises. A bigger deduction this year may create a bigger issue later. Get advice before claiming occupancy expenses.

How does the floor area method work?

The floor area method may be relevant where you have a dedicated area of your home set aside for business. You calculate the business area as a percentage of the total home area — for example, a 12 square metre business area in a 120 square metre home gives 10%. That percentage may then apply to certain costs, depending on the expense type and whether the space genuinely qualifies. A desk in the lounge room does not make the whole lounge room business space.

What if I have wages and an ABN side hustle?

Home office claims get more complicated. You need to separate employee working-from-home use, ABN business use and private household use, and keep records for each activity. Do not double claim the same cost — if you claim part of the internet for employee work and part for ABN business, the total work-related percentage must still be reasonable. The same bill cannot be claimed twice.

July 28, 2026

Home Office Claims for ABN Workers

Quick answer

ABN workers may be able to claim home office expenses if they work from home to earn business or contractor income.

But you can only claim the business-related part.

Private household costs must be excluded.

That means you need to separate:

business use
private use
household use
running expenses
possible occupancy expenses
records that support the claim

Having an ABN does not make your whole house deductible.

It just makes your home office claim worth checking properly.

GoTax helps ABN workers, sole traders, contractors, freelancers and self-employed Australians complete tax returns online, with returns checked by registered tax agents before lodgement.

Start your ABN tax return online with GoTax

What is a home office claim?

A home office claim is a deduction for costs connected to using part of your home to earn income.

For ABN workers, that might include working from home to:

do client work
manage bookings
invoice customers
prepare quotes
answer business emails
keep business records
run an online business
complete freelance projects
manage contractor paperwork
do admin for a sole trader business
process rideshare or delivery records
operate a home-based business

The home office might be:

a separate room
a study
a desk in another room
a dedicated workspace
a room used mainly for business
in some cases, a business area with clients or customers visiting

Different setups can lead to different tax treatment.

A laptop on the couch is not the same as a dedicated business room.

The couch may be comfortable.

Tax law remains unimpressed.

Running expenses vs occupancy expenses

Home office claims usually fall into two broad categories:

Type	What it means
Running expenses	Extra costs from using your home for business
Occupancy expenses	Costs of owning, renting or occupying the home

Running expenses may include things like:

electricity
heating
cooling
lighting
cleaning of a work area
internet
phone
stationery
computer consumables
depreciation of office equipment
repairs to office equipment
office furniture

Occupancy expenses may include things like:

rent
mortgage interest
council rates
land tax
house insurance

Running expenses are more common.

Occupancy expenses are more sensitive.

That is accountant language for: do not just claim part of your rent because you once emailed a client from the kitchen.

Can ABN workers claim running expenses?

Yes, ABN workers may be able to claim running expenses where they run business activities from home and incur additional costs.

Examples may include:

electricity used while working
internet used for business
phone used for business
office equipment
printer ink
stationery
desk and chair
business software
computer equipment
cleaning a dedicated work area

But the claim must be business-related.

If the internet is also used by the household, you need to apportion it.

If the phone is used privately, you need to apportion it.

If the electricity covers the whole home, you need a reasonable method.

“Because I work from home” is not a calculation.

It is a sentence.

The ATO prefers calculations.

What home office expenses can ABN workers commonly claim?

Depending on your facts, home office claims may include the business-use portion of:

Expense	Common issue
Electricity	Business hours vs general home use
Internet	Business use vs household/private use
Mobile phone	Client calls vs private calls
Home phone	Business calls vs private use
Computer	Business use vs private use
Desk and chair	Business use and depreciation rules
Printer	Business printing vs private printing
Ink and paper	Business consumables
Software	Business-only or mixed use
Cleaning	Only if connected to a business work area
Repairs	Only if connected to business equipment or work area

You cannot simply claim every household cost.

The home still has to be a home.

Annoying, but apparently important.

Fixed-rate method for home-based business

For 2026, the fixed-rate method may allow a claim of 70 cents per hour for each hour you operate your business from home.

This can be simpler than calculating every actual cost separately.

But it still needs records.

You need to keep:

written evidence of total hours worked from home
a record or document for each additional running expense incurred
enough detail to show the claim is business-related

The fixed-rate method does not mean:

“Guess some hours and multiply them.”

It means you have a simpler method, but still need support.

The tax office has a long memory for guesses.

Actual cost method

The actual cost method involves claiming the actual business-related costs of working from home.

This may be useful where your real costs are higher and you have strong records.

You may need to work out:

business hours
electricity cost per unit
work area usage
phone usage
internet usage
equipment depreciation
consumables used for business
cleaning costs
repairs
private-use adjustments

The actual cost method can give a better result in some cases.

It can also create more work.

Tax law does love offering a “better” option that arrives carrying spreadsheets.

Floor area method

The floor area method may be relevant where you have a dedicated area of your home set aside for business.

For example, you might calculate the business area as a percentage of the total home area.

Example:

Item	Amount
Total home area	120 square metres
Business area	12 square metres
Business floor area	10%

That 10% may then be relevant to certain costs, depending on the expense type and whether the space qualifies properly.

But do not use floor area lazily.

A desk in the lounge room does not mean the whole lounge room is business space.

Your dog walking through the room is not a business activity.

Unless the dog is on payroll.

Which would raise other concerns.

Occupancy expenses: be careful

Occupancy expenses are more sensitive than running expenses.

They include things like:

rent
mortgage interest
council rates
land tax
house insurance

ABN workers should not assume these can be claimed just because they work from home.

Occupancy expenses usually require the home area to have the character of a place of business.

Indicators may include:

the area is clearly identifiable as a place of business
the area is not readily suitable for private use
the area is used exclusively or almost exclusively for business
the area is used regularly for client or customer visits
the business is genuinely run from that area

A spare room used for business admin may not automatically qualify.

A home hair salon with separate client access may be different.

The details matter.

So does not getting carried away.

Capital gains tax warning

Claiming occupancy expenses may have capital gains tax consequences when you sell your home.

This can matter even if the claim looks attractive now.

That is why rent, mortgage interest and other occupancy-style claims need proper consideration.

A bigger deduction this year may create a bigger issue later.

Tax is very good at moving the problem to a different year and calling it a surprise.

If you are thinking about claiming occupancy expenses, get advice first.

This is not the section for “she’ll be right”.

She will not.

Freelancer home office claims

Freelancers often work from home.

Common freelancer home office costs may include:

laptop
software
internet
mobile phone
desk
chair
monitor
printer
subscriptions
stationery
electricity
business storage
design or editing equipment

But private use still needs to be removed.

Example:

A freelance designer uses home internet for client work and private streaming.

Only the business portion should be claimed.

The fact that a client email arrived while Netflix was open does not make Netflix a business system.

Freelancers can use the GoTax Freelancer Tax Return page.

Contractor home office claims

Contractors may also work from home.

That might include:

preparing quotes
managing invoices
writing reports
doing remote work
completing admin
planning jobs
using business software
communicating with clients
maintaining job records

Contractors should be careful where they also work at client sites or employer-like locations.

Home office claims should reflect actual business use.

If the home office is only used occasionally for minor admin, the claim may be limited.

Checking one email at home does not turn the spare bedroom into corporate headquarters.

Even if the chair has lumbar support.

Contractors can use the GoTax Contractor Tax Return page.

Self-employed home office claims

Self-employed workers often have the clearest connection between home and business activity.

Examples include:

consultant working from home
bookkeeper working from home
online seller managing orders
tutor running online lessons
designer working from a home desk
mobile worker doing admin at home
personal trainer managing client bookings
small business owner handling paperwork

Self-employed workers should still separate:

business use
private use
household use
equipment use
work hours
non-work hours

Use the GoTax Self-Employed Tax Return page if this is your situation.

Small business home-based claims

Some sole traders run a genuine home-based business.

Examples may include:

home salon
consulting practice
online store
tutoring business
bookkeeping business
repair business
photography admin and editing
design studio
home office for a trade business

These businesses may have more substantial home-based claims.

But they also need stronger records.

For example, keep:

floor plans or area calculations
business-use percentage records
electricity and internet records
client appointment records
equipment receipts
photos of dedicated business area, where useful
lease or ownership cost records, if relevant
notes explaining how the area is used
records showing private use has been excluded

Use the GoTax Small Business Tax Return page if you run a home-based small business.

Common mistakes with home office claims

Avoid these:

Mistake	Why it matters
Claiming all rent because you work from home	Occupancy claims have stricter rules
Claiming household internet at 100%	Private and family use must be removed
Guessing hours	Hours need written support
Claiming electricity 24/7	Business use must be substantial and reasonable
Ignoring private phone use	Only business use should be claimed
Claiming furniture with no business use	Private use must be excluded
Claiming occupancy expenses without CGT thought	May create future tax issues
No records	Weakens the deduction
Copying last year	Work patterns change
Confusing employee WFH and ABN business use	Rules and facts may differ

A home office claim is not hard because the concept is hard.

It is hard because real homes are messy.

Tax law prefers neat boxes.

Most homes have laundry baskets in them.

Records to keep

For home office claims, useful records may include:

hours worked from home
diary entries
timesheets
calendars
invoices
client work records
electricity bills
internet bills
phone bills
receipts for furniture
receipts for equipment
software invoices
stationery receipts
printer and ink records
floor area calculations
depreciation records
photos or notes showing dedicated business area
records explaining business/private split

The key is to show:

what you claimed
why it relates to business
how you calculated it
what private use was removed

A claim without records is not a deduction.

It is a hope.

Hope is not usually accepted as evidence.

Simple example: internet and phone

Sam is self-employed and works from home.

During the year, Sam paid:

Expense	Total
Internet	$960
Mobile phone	$1,200

Sam reviews usage and estimates:

Expense	Business use
Internet	40%
Mobile phone	50%

Potential business-use claim:

Expense	Calculation	Claim
Internet	$960 × 40%	$384
Mobile phone	$1,200 × 50%	$600

Total potential claim:

$984

Sam does not claim 100%.

Why?

Because Sam is honest, sensible and possibly tired of ATO letters.

Simple example: home office hours

Riley runs an ABN side business from home.

Riley works from home on the business for 8 hours per week over 40 weeks.

Total business home hours:

8 × 40 = 320 hours

If using a fixed-rate method, Riley needs records supporting those hours and the relevant running expenses.

A calendar or diary can help.

A vague memory cannot.

“Most Tuesdays, probably” is not the strongest tax evidence ever invented.

What about employees with an ABN side hustle?

Many people have both:

wages as an employee, and
ABN income from a side business

This can make home office claims more complicated.

You may need to separate:

employee working-from-home use
ABN business use
private household use
shared costs
records for each activity

Do not double claim the same cost.

For example, if you claim part of internet for employee work and part for ABN business, the total business/work percentage still needs to be reasonable.

The same internet bill cannot be claimed twice just because it had a busy year.

Read the broader GoTax guide: How to Do an ABN Tax Return in Australia in 2026

How GoTax helps

GoTax helps ABN workers and sole traders complete their tax returns online.

The system prompts you through income and deduction areas, and your return is checked by registered tax agents before lodgement.

That can help with:

home office running expenses
private-use adjustments
phone and internet claims
freelancer home office costs
contractor admin claims
self-employed expenses
small business records
car and home office crossover issues
ABN income reporting

GoTax does not make unsupported home office claims safe.

It helps you claim properly.

Which is much better than being creatively wrong.

Start your ABN tax return online with GoTax

Quick checklist before claiming home office expenses

Before claiming, ask:

Did I genuinely work from home for ABN or business income?
What part of the home was used?
Was the area dedicated or mixed-use?
Did I separate private use?
Did I keep records of hours worked?
Do I have bills or receipts?
Did I calculate business-use percentages?
Am I claiming running expenses only?
Am I considering occupancy expenses?
Have I considered possible CGT consequences?
Did I avoid claiming ordinary private household costs?
Does the claim match my business activity?

If you can answer those questions clearly, you are in better shape.

If not, tidy the records before lodging.

The home office should not be the room where deductions go to get weird.

Frequently asked questions

Can ABN workers claim home office expenses?

Yes, ABN workers may be able to claim home office expenses where they work from home to earn business income and keep records to support the claim.

Can I claim rent if I work from home with an ABN?

Not automatically. Rent is an occupancy expense and is more sensitive. You generally need to consider whether part of the home has the character of a place of business. There may also be capital gains tax implications.

Can I claim internet as an ABN worker?

You may be able to claim the business-use portion of internet costs, but private and household use must be excluded.

Can I claim my mobile phone?

You may be able to claim the business-use portion of your mobile phone costs if it is used for ABN or business income. Private use must be removed.

Do I need a separate home office?

Not always for running expenses. But having a dedicated work area may affect how some claims are calculated and whether occupancy expenses are relevant.

What records do I need for home office claims?

Keep records of hours worked from home, bills, receipts, usage calculations, business-use percentages and any floor-area calculations if relevant.

Can I claim electricity for working from home?

You may be able to claim the business-related portion of additional electricity costs, using a reasonable method and proper records.

What is the fixed-rate method for 2026?

For home-based business running expenses, the 2026 fixed-rate method may allow 70 cents per hour for each hour you operate your business at home, provided you keep the required records.

Can GoTax help with home office deductions?

Yes. GoTax helps ABN workers, sole traders, freelancers, contractors and self-employed Australians complete tax returns online, with returns checked by registered tax agents before lodgement.

About the Author

Written by Mark Walmsley, Chartered Accountant and Registered Tax Agent.

GoTax helps Australians complete their tax returns online, with returns checked by registered tax agents before lodgement.

General Information Disclaimer

This article provides general information only and does not take into account your personal circumstances. Tax law can change and deduction eligibility depends on your income, business activity, home office use, records, GST position and specific facts. If you are unsure, seek advice from a registered tax agent.

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