Quick answer
You can claim the business share of your home costs, not the whole bill. Running expenses such as electricity, internet and phone are claimed either by the fixed rate method (70 cents per hour worked from home for 2025-26, with a record of actual hours) or by working out actual costs. Occupancy costs like rent or mortgage interest only count if part of your home is set aside as a place of business.
Key points
- Claim only the business share of a home cost, and only for the time or space used for business.
- Running costs (power, internet, phone, stationery) and occupancy costs (rent, mortgage interest, rates, insurance) are treated very differently.
- The ATO's fixed rate is 70 cents per hour for 2024-25 and 2025-26, and you need a record of the hours actually worked from home.
- A spare-room desk is usually a running-costs claim; a dedicated, exclusive-use area is what opens the door to occupancy costs.
- Claiming occupancy costs can cost you part of the CGT main residence exemption when you sell, so ask your accountant before you do.
- Keep records for five years. The same tidy records later show a lender what your business really earns.
Here’s the idea in one sentence: when you run a business from home, you can claim the business share of your home costs, and nothing for the private share.
That sounds obvious, but it hides two traps that catch first-year owners. The first is claiming too much (the whole internet bill, a slice of the rent for a laptop on the couch). The second is the opposite: claiming nothing because you aren’t sure what’s allowed, and handing the ATO money you didn’t owe. This guide sorts out what’s claimable, which method to use and what to keep so a claim stands up.
What’s the difference between running costs and occupancy costs?
Home costs fall into two buckets, and almost every confusing answer you find online comes from mixing them up.
| Running expenses | Occupancy expenses | |
|---|---|---|
| What they are | Costs of using the home to work | Costs of having the home |
| Examples | Electricity, internet, phone, stationery, heating and cooling while you work | Rent, mortgage interest, council rates, home insurance |
| Can a spare-room or kitchen-table worker claim them? | Yes, for the business share | Generally no |
| What do you need? | Some genuine business use and records | An area set aside and used exclusively as a place of business |
| Side effect | None to speak of | Can reduce your CGT main residence exemption (see below) |
Most beginners are in the left-hand column. If you work from a desk in the spare room and also use it for the kids’ homework, you’re claiming running costs. A studio, treatment room or workshop that only the business uses, and that clients or the business itself relies on, is a different case.
How do I claim running costs: fixed rate or actual cost?
You have two ways to claim running costs. Pick one for the year and be consistent.
The fixed rate method
The ATO publishes a set amount per hour worked from home: 70 cents per hour for 2024-25 and 2025-26 (it was 67 cents for the two years before). The rate is designed to cover electricity and gas, internet, mobile and home phone, and stationery and computer consumables, so you can’t claim those separately as well.
The catch is the paperwork. You need a record of the actual hours you worked from home, and the ATO doesn’t treat an estimate of a “typical week” as a substitute. A simple diary or a spreadsheet you tick off each evening is enough, as long as it’s kept as you go.
Things the rate doesn’t cover, and that you can claim separately for their business share: the decline in value of a desk, chair, laptop or printer, repairs and the cost of the equipment itself.
The actual cost method
You work out what each cost really was and claim the business percentage. It takes more effort and can give a bigger number if your costs are high, such as a heater running all winter or a phone plan that’s mostly business calls. You need the bills and a sensible way to split each one: a four-week diary of real use is a common way to set the percentage for the year.
An illustrative example
Sam is a first-year bookkeeper working from the second bedroom. Sam works about 25 hours a week at home for 48 weeks and keeps a simple hours diary. The figures below are made up to show the method.
| Fixed rate | Actual cost | |
|---|---|---|
| Hours worked at home | 1,200 | 1,200 |
| Calculation | 1,200 × $0.70 | Power share $220 + internet 50% of $1,200 + phone 40% of $900 + stationery $150 |
| Claim | $840 | $1,330 |
| Records needed | Hours diary, plus a bill for each cost type | Every bill, plus the way each percentage was worked out |
Actual cost wins by $490 here, but only because Sam kept every bill and a four-week usage diary. Without them, the $840 would be the safer claim. The right answer depends on your costs and how organised you are, which is a five-minute question for your tax agent.
Can I claim part of my rent or mortgage?
Usually not for a spare-room setup, and this is where owners over-claim.
Occupancy costs can generally be claimed only where part of the home is set aside and used exclusively as a place of business: a separate studio, a consulting room, a workshop. A desk in a room the family also uses doesn’t pass that test.
If you do qualify, you claim the floor-area share of the cost, for example 10% of the rent for a room that’s 10% of the home. Mixed use means the claim is typically reduced or not available, so be honest about how the space is used.
Will claiming home costs affect the sale of my house?
It can, which is why occupancy claims deserve a conversation before you make them.
Your home is normally exempt from capital gains tax when you sell, under the main residence exemption. The ATO’s guidance on home-based business and CGT explains that you can lose the exemption on the part of the home used as a place of business if you could claim occupancy expenses for it, even if you didn’t. In the ATO’s own illustration, a taxpayer using 10% of the floor area keeps a 90% exemption.
The ATO’s view is that running-cost claims generally don’t affect the exemption, so this risk sits with occupancy costs. If you own your home and use a dedicated area, ask your accountant whether the saving this year is worth the possible cost on a future sale.
What are the common myths about home office claims?
- “I can claim my whole internet bill.” Only the business share. If the family streams on the same connection, the private share isn’t yours to claim.
- “I need a separate room.” Not for running costs. You need genuine business use, not a door.
- “The ATO rate is for employees, so it doesn’t apply to me.” The rate is published on the ATO’s employee pages, but the ATO guidance applies to individuals running a business from home as well. The records you need are the same. Confirm your own situation with a tax agent, as business and employee rules differ in other ways.
- “A bank statement is a record.” A bank statement shows you paid something. It doesn’t show how much of it was for the business.
- “I’ll reconstruct my hours at tax time.” The hours record has to be genuine, and a rebuilt one is the first thing to fall over in a review.
What records should a home-based business keep?
A short checklist you can set up this week:
- An hours record if you use the fixed rate (calendar, diary or spreadsheet, updated weekly).
- Bills for electricity, gas, internet and phone, saved digitally the day they arrive.
- A four-week usage note if you use actual cost: how much of the internet, phone and power was for business.
- A floor-area note (room size ÷ home size) if you’re looking at occupancy costs.
- Receipts for equipment, with the purchase date and business-use percentage.
- A one-line note of the method you chose each year, so next year’s claim matches.
Keep it all for five years, as the business.gov.au record-keeping page explains. If you’re also setting up your year-end routine, our first EOFY checklist shows where these records fit, and your first BAS is a good prompt to file them every quarter.
Why do home deductions matter when I want a loan?
Because the paperwork that makes a claim safe is the same paperwork a lender wants. A lender reads your bank statements and tax return to understand turnover and profit, and a business with tidy records and sensible claims looks like one that’s run properly. Sole traders weighing up a structure change should also read how moving from sole trader to a company changes borrowing, and our guide to turnover and bank statements shows what a lender actually looks at. If you want to see how ready your records are, the loan readiness quiz takes a few minutes.
Planning a purchase for the home office, like a computer, a workbench or a fit-out? Check your options here and a real person will talk it through.
Ready to see where you stand?
Claiming the right amount at tax time is one part of running a home business well. The other is knowing you could fund growth when the chance comes: a new computer, stock for a busy season or a first hire.
If you’re wondering what your options might look like, filling in our short form takes about a minute. Asking won’t touch your credit file, because there’s no credit check when you first enquire. We don’t send your details to a pile of lenders either. Your enquiry stays with one real person, who reads your situation and calls you to explain what might suit in plain English.
One small favour: please fill the form in accurately, including your turnover and what the money is for, so we can match you to the right option first time.
Frequently asked questions
Can I claim my home internet and phone as a business owner?
Yes, for the business share. If you use the fixed rate method, internet, phone, electricity and stationery are already covered by the hourly rate, so you can't claim them again on top. If you use the actual cost method, you claim the business percentage of each bill, worked out from a representative period such as four weeks of real use, and keep the bills.
Do I need a separate room to claim a home office?
No. You can claim running costs for time you genuinely work at the kitchen table or in a spare room. A dedicated room or area matters only for occupancy costs such as rent, mortgage interest and rates, which generally need part of the home to be set aside and used as a place of business.
Can I claim a share of my rent or mortgage?
Only in limited cases. Occupancy costs are generally claimable only where an area of your home is set aside exclusively as a place of business, such as a studio or clinic that clients or the business use. For a laptop on the dining table, they aren't. If you do claim them on a home you own, part of the CGT main residence exemption may be lost when you sell.
What records do I need to keep for the 70 cent method?
A record of the actual hours you worked from home across the year, such as a timesheet, diary or roster, plus evidence that you have the expenses the rate is meant to cover (for example a bill for each type of cost). An estimate or a guess at a typical week isn't a safe substitute.
Can I claim the cost of a desk, laptop or printer?
Yes, as separate claims. Equipment and furniture aren't covered by the fixed rate, so you claim their cost or decline in value on top, for the business share of their use. Items under the small-business instant asset write-off threshold can often be claimed in full in the year you buy them, so check the current threshold with the ATO or your tax agent.
How long do I keep my home business records?
Generally five years from when you lodge the return the records relate to, and longer for some assets. Keep the bills, the hours record and a short note of how you worked out each percentage.
Does a home-office claim affect my chances of a business loan?
Not directly. Lenders look at your turnover, bank statements and how the business is managed. Claiming sensible, well-recorded deductions lowers taxable profit, so it's worth chatting with a real person about how your tax return and your bank statements tell the same story.