When occupancy costs are deductible

One of the most common questions I’ve received over the past few months is whether those who have been working from home due to Covid-19 can claim a tax deduction for so-called “occupancy expenses” such as a portion of the interest on their mortgage or a portion of their rent. Many people take the view that as they have been obliged by their employers – and sometimes by the law – to work only from home, the portion of costs that relate to their home office should be claimable against tax.

Traditionally, the ATO has refused to allow deductions for such costs in most cases. Unless your home is your sole base of operations (that is, you are not provided with access to an office by your employer) or you run a business from home, occupancy costs have been a no-go area, with only so-called “running costs” (such as heating and cooling, lighting, cleaning, phone, internet and equipment depreciation) being tax deductible.

But is it now possible to argue that, with offices shuttered, your home has become – temporarily at least – your sole base of operations? Sadly, it doesn’t look like it. The ATO has made clear that it is offering no flexibility, stating that “occupancy expenses relating to your home such as rent, mortgage interest, property insurance and land taxes will not become deductible only because you are required to work from home temporarily as a consequence of Covid-19”.