What expenses can I claim for a home-based business in Australia?

Australian home-based businesses can claim running expenses including heating, cooling, lighting, phone, internet, and the depreciation of business equipment. If your home operates as a genuine place of business, such as a dedicated workshop or client-facing office, you may also claim apportioned occupancy expenses like rent and council rates.

Can tradies claim mortgage interest or rent for a home workshop?

You can claim mortgage interest, rent, and council rates only if your home has the character of a place of business. This requires a dedicated, clearly identifiable area such as a separate workshop, shed, or office that is not readily adaptable for private domestic use. Claiming occupancy expenses may trigger Capital Gains Tax.

What is the difference between running expenses and occupancy expenses?

Running expenses cover the day-to-day operational costs of using your home for work, such as electricity, cleaning, and equipment depreciation. Occupancy expenses cover ownership or rental costs, including council rates, building insurance, rent, and mortgage interest, which are strictly restricted to genuine places of business under Australian Taxation Office guidelines.

How do I calculate the business portion of electricity and internet?

You can calculate running expenses using the ATO fixed rate method or the actual cost method. The actual cost method requires a representative four-week diary log to determine business percentage versus private use, applied against utility bills, or calculating power consumption based on equipment kilowatt-hours and current energy tariffs.

Does claiming home business expenses trigger Capital Gains Tax?

Claiming occupancy expenses like mortgage interest removes the full main residence Capital Gains Tax exemption on your home. When you sell the property, you must pay CGT on the proportion of the home used for business, calculated from the date the business first used the dedicated area.

How long must I keep home business tax records under ATO rules?

The Australian Taxation Office requires you to keep all tax receipts, logbooks, utility bills, and calculation worksheets for a minimum of five years from the date you lodge your tax return. If you claim depreciation on capital assets, keep records for five years after the final asset disposal.

What can I claim for a home-based business in Australia?

Claim home-based business expenses in Australia by deducting running costs, depreciating assets, and claiming occupancy expenses if operating a dedicated workshop.

Quick answer

Australian home-based businesses can claim running expenses including electricity, phone, internet, cleaning, and asset depreciation. If the home contains a dedicated, non-domestic work area like a trade workshop, apportioned occupancy costs including rent, insurance, and mortgage interest are also deductible under Australian Taxation Office regulations.

Skill level: General guidance
Time: Varies
Trade: Accounting & Business Structures
Updated: 4 November 2026

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What can Australian home-based businesses claim at tax time?

If you run a home-based business in Australia, you may be able to claim some of your running costs and, in some cases, occupancy-related expenses at tax time. The tricky part is that the rules depend on how you use the space, whether it’s a genuine place of business, and what records the ATO expects you to keep.

What key principles govern home-based business expense claims in Australia?

Home-based business claims usually fall into two broad categories: running expenses and occupancy expenses. Running expenses can include things like electricity, internet, phone use and cleaning for the work area, while occupancy expenses may apply in more limited cases where part of the home is genuinely used as a place of business.

The ATO generally expects you to separate business use from private use. If an expense is partly personal and partly business, you can usually only claim the business portion, and you need a reasonable method to work that out.

Not every person working from home is treated the same. A sole trader, contractor or small business owner operating from a dedicated business area may be in a different position to someone simply doing admin from the kitchen table or occasionally working from home.

Record-keeping matters. The ATO may require evidence such as invoices, bills, diary records, floor area calculations, usage logs or a reasonable basis for apportionment. Good bookkeeping makes year-end tax work much easier and helps reduce the risk of overclaiming.

Claiming home-based business expenses can affect other areas, including capital gains tax implications when you sell your home, GST treatment if you’re registered, and how your accountant sets up your chart of accounts and year-end deductions. That’s why the right approach is rarely one-size-fits-all.

What does an ATO-compliant review of home-based business expenses involve?

Whether your home space is a genuine place of business under ATO guidance, or simply a convenient work area used for business tasks.

The types of expenses you incur and whether each one is fully deductible, partly deductible or not claimable based on your business structure and actual use.

How to calculate a fair and defensible business-use percentage for internet, phone, utilities, rent, mortgage interest or other relevant costs.

Whether claiming certain home occupancy expenses could create long-term tax consequences, including CGT issues, and whether the short-term deduction is worth it.

Whether your records, bookkeeping systems and supporting documents would stand up if the ATO asked questions, and whether any ASIC, GST or business-structure issues also need attention.

Common Costly Mistakes

Claiming private household costs as if they were fully business-related.

Assuming everyone working from home can claim rent, mortgage interest or council rates.

Using rough estimates without proper records or a clear apportionment method.

Focusing on a bigger deduction now without understanding possible CGT or compliance consequences later.

When To Get Professional Help

DIY can start to fall apart when you use part of your home exclusively for business, have higher household costs, are registered for GST, or operate through a company or trust. It’s also worth getting advice if you’re unsure whether your home is a true place of business or you want to claim more than basic running costs.

Talk To A Specialist

If you want to claim what you’re entitled to without stepping into overclaiming territory, a short conversation with an accountant can help clarify the rules for your setup. You’re welcome to book a free accounting discovery call here: /finance/enquire?service=accounting

Frequently Asked Questions

What can I claim if I run my business from home in Australia?

In general, home-based business owners may be able to claim part of their running expenses, such as electricity, internet, phone and cleaning connected to the business area. Some people may also be able to claim occupancy expenses, but that depends on whether the space is a genuine place of business under ATO rules. The exact claim depends on your use of the space and your records.

Can I claim rent or mortgage interest for a home business?

Sometimes, but not automatically. These types of occupancy expenses are usually more restricted and often depend on whether part of the home has the character of a place of business rather than just somewhere you happen to work. Because these claims can have tax consequences later, including potential CGT issues, it’s sensible to have them reviewed carefully.

Do I need a separate room to claim home-based business expenses?

Not always. You may still be able to claim some running costs without a separate room if you can show business use and apportion the expense reasonably. A separate, dedicated area can make the position clearer, but the outcome still depends on the facts and the ATO’s criteria.

How do I work out the business portion of internet and electricity?

The ATO generally expects a reasonable basis supported by records, such as usage patterns, time spent working, the area used for business, or other evidence depending on the expense. There isn’t one universal method that suits every business. The safest approach is to use a method that matches how the cost is actually incurred and keep documents to support it.

Should a sole trader use an accountant for home office claims?

For basic claims, some sole traders can manage the record-keeping themselves, but the risk rises once claims become more substantial or include occupancy costs. An accountant or registered tax agent can help you apply ATO guidance properly, avoid overclaiming and make sure your bookkeeping supports the return. You can also check a practitioner’s registration on the Tax Practitioners Board website.

Important — General Information Only

This content is general information only and is not personal accounting, tax or business structures advice. It does not take into account your objectives, financial situation or needs, and you should consider your own circumstances and seek advice from a qualified accountant, registered tax agent or other appropriately licensed/registered professional before acting. For current rules and guidance, refer to the ATO, and where relevant check practitioner registration with the Tax Practitioners Board (TPB), business registration information with ASIC, and general small business resources from CPA Australia and Chartered Accountants ANZ.

Frequently asked questions

What expenses can I claim for a home-based business in Australia?: Australian home-based businesses can claim running expenses including heating, cooling, lighting, phone, internet, and the depreciation of business equipment. If your home operates as a genuine place of business, such as a dedicated workshop or client-facing office, you may also claim apportioned occupancy expenses like rent and council rates.
Can tradies claim mortgage interest or rent for a home workshop?: You can claim mortgage interest, rent, and council rates only if your home has the character of a place of business. This requires a dedicated, clearly identifiable area such as a separate workshop, shed, or office that is not readily adaptable for private domestic use. Claiming occupancy expenses may trigger Capital Gains Tax.
What is the difference between running expenses and occupancy expenses?: Running expenses cover the day-to-day operational costs of using your home for work, such as electricity, cleaning, and equipment depreciation. Occupancy expenses cover ownership or rental costs, including council rates, building insurance, rent, and mortgage interest, which are strictly restricted to genuine places of business under Australian Taxation Office guidelines.
How do I calculate the business portion of electricity and internet?: You can calculate running expenses using the ATO fixed rate method or the actual cost method. The actual cost method requires a representative four-week diary log to determine business percentage versus private use, applied against utility bills, or calculating power consumption based on equipment kilowatt-hours and current energy tariffs.
Does claiming home business expenses trigger Capital Gains Tax?: Claiming occupancy expenses like mortgage interest removes the full main residence Capital Gains Tax exemption on your home. When you sell the property, you must pay CGT on the proportion of the home used for business, calculated from the date the business first used the dedicated area.
How long must I keep home business tax records under ATO rules?: The Australian Taxation Office requires you to keep all tax receipts, logbooks, utility bills, and calculation worksheets for a minimum of five years from the date you lodge your tax return. If you claim depreciation on capital assets, keep records for five years after the final asset disposal.

Written by Ledger, the Accounting & Business Structures specialist at Aus.Tools.