Does claiming work-from-home expenses affect my CGT exemption?

Running costs from a home office: no effect

Working from a desk, a study or a spare room that is also used privately, you can claim the running costs of working there: energy, internet and phone, stationery, and the decline in value of equipment. The ATO says plainly that there are no capital gains implications if you only claim running expenses. You can work them out with the fixed rate — 70 cents an hour for 2024–25 and 2025–26 — or with your actual costs.

That covers most people who work from home, including most sole traders who work at a desk and see clients elsewhere. The ATO’s own example is a digital marketer who works mostly from a home office that she and her partner also use to study: no place of business, no occupancy claim, full exemption.

A place of business at home: deductions now, some CGT later

An area has the character of a place of business when it is clearly identifiable as one, isn’t readily usable for private purposes, and is used exclusively or almost exclusively for the business — a hairdressing salon or a doctor’s surgery in the ATO’s examples. Then you can claim occupancy costs for that floor-area share: mortgage interest or rent, council rates, land tax and house insurance.

The catch is on the sale. The share of the gain you could have deducted interest for — generally the same floor-area share — is outside the main residence exemption, whether or not you actually claimed the interest. The 50% CGT discount still applies to it if you owned the home at least 12 months. If you started using the space for business after 20 August 1996, that share’s gain is measured from the home’s market value when the business use began.

Whether the deductions are worth more than the tax depends on how much the home grows. The business space at home tool works out the break-even growth: below it the deductions come out ahead, above it the tax on sale is larger.

Employee, sole trader, or both

As an employee working from home you generally can’t claim occupancy costs, only running costs, claimed as a work-related expense at D5. The exception is narrow: your work needs a place of business, your employer provides no alternative place to work, and the area is used exclusively or almost exclusively for work.

If you also run a business from the same home, the two are separate claims. The job’s share of the running costs goes to D5; the business’s share, and any occupancy costs for a genuine place of business, are business expenses. Only a place of business for the business affects the exemption.

A home owned through a company or a trust is a different question altogether: the main residence exemption is for individuals.

The ATO’s updated guidance, and small business concessions

The ATO’s page on home-based business and CGT, last updated 3 February 2026, sets out worked examples for the partial exemption and for the small business CGT concessions; Accountants Daily reported it on 13 March 2026 as a narrow approach. The key point: the concessions need the home to be an active asset, and the test is applied to the whole property, not just the business part. For a home used mainly as a home, the ATO says that will rarely be met — its example is a salon taking 7% of the floor area.

A co-owner who doesn’t use the home to produce income keeps the full exemption on their share, in the ATO’s example of Elena and Mathew.

Renting a room to friends or family

Money from family or others in the household toward shared costs is a domestic arrangement: not income, nothing to deduct, and the exemption stays whole. It becomes income, even from family, when it is rent for the use of the property under a lease or licence. If that rent is below the going rate, deductions are apportioned, and the ATO accepts limiting them to the rent received.

A lodger paying the going rent is rental income. You deduct their share of the home’s costs — their room plus a share of the areas you both use — and that share of the gain, for the time they live there, is outside the exemption. The tool’s “Someone else lives here” tab works through each situation.

Moving out: the 6-year rule

After you move out you can keep treating a home as your main residence — for up to 6 years for each absence if it earns income, such as rent, and with no time limit if it doesn’t. While you do, no other home can be your main residence, apart from up to 6 months when moving house. If part of the home was a place of business before you moved out, that part can’t be covered after you leave.

What changes from 1 July 2027

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is law. For gains accruing after 1 July 2027, the 50% discount for individuals is generally replaced by indexation of the cost base and a 30% minimum tax on capital gains; gains before that date keep the discount. The main residence exemption itself is unaffected — but a business share of a home is exactly the part of the gain the new rules reach.

The method for valuing a home at 1 July 2027 hasn’t been published, so the tool works out only the growth to 30 June 2027 and labels it. Everything here is an estimate from the figures you enter. This is general information, not personal tax advice — check what applies to you with your accountant or the relevant tax authority.