If you work from home, whether by choice, by arrangement with your employer, or because youwere required to during COVID-19, you’ve probably wondered at some point whether you can claim a slice of your rent or mortgage interest, or the cost of driving between home and the office.

A recent Full Federal Court decision has now given a clear (and for many taxpayers, disappointing) answer.

The two claims employees often assume are available

There are two deductions employees frequently ask about, and both have long been more restricted than people expect.

Home occupancy expenses

Costs like mortgage interest, rent, council rates and building insurance are different from every day running costs like electricity or internet. The ATO’s long-standing position is that occupancy expenses are only deductible where part of your home has genuinely become a place of business, meaning it’s used as your sole base of operations, or set aside exclusively for carrying on income-earning activities. Simply choosing, or even being required, to work from home some of the time has never been enough on its own.

Travel between home and your regular workplace

The general rule has always been that the cost of getting to and from work is private in nature; it’s the price of choosing where you live relative to your job, not a cost of actually doing the job. The key distinction the ATO draws is between travelling “on work” (in the course of performing your duties, which can be deductible) and travelling “to work” (just getting there, which isn’t).

Both of these principles were recently tested, and reinforced, in a closely watched case.

Hall’s case: the facts

The taxpayer, Mr Hall, was a sports presenter and producer employed by the ABC. After relocating from Sydney to Melbourne, he and his wife rented a two-bedroom apartment around eight kilometres from the ABC'’ Southbank studios, with the lease in his name alone.

During the 2021 income year (entirely shaped by COVID-19 restrictions) his role with theABC was split in two

• A Digital Role (about 75% of his duties), involving editing audio files, performed exclusively from the spare bedroom of his apartment; and
• A Live Role (about 25% of his duties), producing live NRL broadcasts, performed at the Southbank studios.

On days he had to do both, his routine was to start the Digital Role at home, then close the laptop, grab his car keys, and drive to the studio to begin the Live Role.

He claimed a deduction for a portion of his rent (as a home occupancy cost) and for the car expenses of driving to the studio.

What the Tribunal initially decided

The Administrative Review Tribunal sided with Mr Hall on both counts. It treated part of his rent as attributable specifically to the spare bedroom used forwork and accepted that because he was already “at work” performing the Digital Role immediately before leaving, his drive to Southbank was travel undertaken “on work” rather than simply travel “to work”, and therefore deductible.

What the Full Federal Court decided on appeal

The ATO appealed, and the Full Federal Court overturned the Tribunal’s decision entirely, denying both the occupancy expense claim and the travel claim.

On the rent claim, the Court’s reasoning is worth understanding because of how it rejected the Tribunal's approach:

• It accepted that Mr Hall had used the spare bedroom exclusively for income-producing purposes, out of necessity rather than mere convenience.
• But it rejected the idea that a single rental payment could be split into two different “kinds” of expense; a deductible portion for the spare bedroom and a non-deductible portion for the rest of the apartment.
• The spare bedroom was not business premises; it was simply a room in a home from which work happened to be performed. The essential character of the rent was to secure domestic accommodation, and that character doesn’t change just because part of the home is used for work. As a result, the expense failed the “private or domestic” exclusion in the tax law, regardless of how the room was actually used.

On the ravel claim, the Court took a view that's particularly important for anyonejuggling more than one role or location for the same employer:

• It treated the Digital Role and the Live Role as two separate income-earning activities, even though both belonged to the same job with the same employer.
• Because Mr Hall had finished one activity before starting the drive, and the drive was undertaken to get to the location where the second activity would begin, the Court held this was travel “to work”, not “on work”, even though, practically speaking, he was clearly already “working” in an everyday sense.

What this means in practice

The ATO hassince issued a Decision Impact Statement confirming it sees Hall’s case as endorsing its existing, fairly strict approach. A few key takeaways for anyone working from home:

Being required to work from home is not, by itself, enough

Even agenuine, COVID-driven requirement to use a spare room exclusively for work did not convert rent into a deductible expense. If your employer still provides youwith a desk or office, you're highly unlikely to succeed with an occupancy expense claim, no matter how often you actually work from home.

Splitting one payment into “deductible” and “non-deductible” portions doesn't work the way many taxpayers assume

The character of an expense like rent is generally assessed as a whole, not allocated room-by-room based on use.

Doing two different things for the same employer can count as two different jobs for tax purposes

If your day involves a clear changeover, finishing one task, then travelling to start something distinct at another location, the travel between them is at real risk of being treated as ordinary, non-deductible commuting, even if you were technically “on the clock” the whole time.

The genuineexception remains narrow

If part of your home truly operates as your sole base of operations, for example, your employer provides no workspace at all, a deduction for occupancy expenses (and travel from that base to other work locations) may still be available. But this is a high bar, not a default position.

What you should do

If you’re currently claiming, or considering claiming, a portion of your rent, mortgageinterest, or home-to-work travel as a tax deduction, it’s worth having an honest conversation about whether your circumstances genuinely meet the “place of business” test, or whether Hall’s case has effectively closed off that claim for you.

Running expenses like electricity, internet, and depreciation of home office equipment are a separate and generally more accessible category of deduction and aren’t affected by this decision in the same way.

If you’d like us to review your current working-from-home claims in light of this decision, get in touch with our office, we’re across the detail and can help you understand exactly where you stand.

This article is general in nature and does not constitute tax advice. It discusses the Full Federal Court’s decision in Hall’s case and the ATO’s published Decision Impact Statement. Speak with us about how these principles apply to your specific circumstances.