Occupancy expenses

Occupancy expenses are expenses you pay to own, rent or use your home. They 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 will be no capital gains tax (CGT) implications for your home.

You can only claim occupancy expenses if you can 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.

Example: Occupancy expenses deductible

Michael works for a statutory authority in Brisbane who permanently closed all their offices at the end of January 2022. From 1 February 2022, Michael sets aside a room in his house for his work with the statutory authority. The floor area of the room is 10% of the house’s total floor area.

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.

Michael locks the door to the room when it is not in use so his children can’t get in, and he doesn’t use it for non-work purposes. Michael can claim a deduction for occupancy expenses relating to working from home for 5 months of the year because:

  • His employer does not 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.

Michael 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

Michael 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 Michael 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.

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