If you've been claiming rent as a work-from-home deduction on your tax return, a Federal Court ruling handed down in April 2026 has just changed the picture.
The case involved an ABC Sports presenter, a spare bedroom, and a pandemic-era lockdown. The court's answer — that rent is still a domestic expense, full stop — will affect hundreds of thousands of Australian employees who assumed they could claim their housing costs because they worked from home. The ruling is now widely recognised as a landmark decision on the limits of WFH deductions.
Here's what the ruling actually means for your 2026 tax return, and what you can still legitimately claim.
What the Court Decided
The case is formally known as Hall v Australian Taxation Office. Ned Hall, an ABC Sports presenter based in Melbourne, claimed two deductions for the 2021 financial year:
- $5,878 in rent for a spare bedroom he used exclusively as a home office during Victoria's COVID-19 lockdowns
- $1,148 in car expenses for travel between his home and ABC's Southbank studios
The ATO originally rejected both claims. Hall appealed to the Administrative Appeals Tribunal (AAT), which sided with him in 2025. The ATO then appealed that decision to the Federal Court — and won.
Justice Tom Thawley's reasoning came down to one principle:
"The mere use of a room in a home for work purposes does not, of itself, transform an otherwise private or domestic expense into a deductible one."
In plain terms: rent exists to give you somewhere to live. The fact that you also happen to work in that space doesn't change its fundamental character as a domestic expense — even if you were legally required to stay home.
The Two Deductions That Are Now Off the Table
For employees, the ruling draws a clear line around two types of claims:
1. Rent or mortgage interest for a home office
Previously, some employees were successfully arguing that a portion of their rent (based on floor area or exclusive use) was a legitimate work expense. The Hall ruling closes that argument for employees. The essential character of rent is domestic accommodation — that doesn't change because you set up a desk.
Council rates and property insurance attributed to a home office are in the same position — they're costs of your home, not your work. Tax law calls these occupancy expenses, and the Hall ruling confirmed they sit firmly on the private side of the line. What's still deductible are running expenses — the costs of actually using the space to work, like electricity and internet.
2. Travel from home to your workplace
Hall also claimed car expenses for commuting from home to the ABC studios. This was rejected on the same logic: travelling to a workplace is a private expense, not a work expense. The fact that you started from home, rather than from a different location, doesn't make commuting deductible.
This part of the ruling isn't new — commuting has always been treated as private — but the case reinforces it clearly.
What You Can Still Claim
The ruling doesn't touch the two main methods the ATO offers for WFH expenses, and both remain valid.
The fixed-rate method (the simpler option)
The ATO's fixed-rate method lets you claim 70 cents for every hour you worked from home during FY2024-25. This covers:
- Electricity and gas
- Phone (mobile and landline)
- Internet
- Stationery and printer consumables
You don't need to keep receipts for each of these individually. But you do need a record of every hour you worked from home — a timesheet, roster, calendar, or diary entry for each day, covering the full financial year from 1 July to 30 June. The ATO no longer accepts a representative 4-week log as a substitute for the full year's records.
Important: The 70c rate is all-inclusive for phone and internet. If you use the fixed-rate method, you cannot also claim a separate deduction for mobile phone data or home internet — even for work calls made while out of the office. Pick one method.
Example: An employee who works from home three days a week (roughly 24 hours) for the full financial year can claim:
24 hours/week × 48 weeks × $0.70 = $806.40
(Using 48 weeks to account for four weeks of annual leave — you can only claim for hours actually worked from home, not leave weeks.)
No receipts for electricity or internet required. Just the hour log.
The FY2025-26 rate hasn't been officially confirmed yet — the ATO typically announces this in May or June ahead of tax time. The FY2024-25 rate was 70 cents, up from 67 cents in prior years.
The actual cost method (more work, potentially more)
If the fixed-rate method doesn't capture your real costs, you can claim the actual work-related portion of each expense separately. Post-Hall, what's still available under this method includes:
| Expense | What's deductible | What you need |
|---|---|---|
| Electricity | Work-use % of annual bill | Quarterly bills + usage calculation |
| Internet | Work-use % of annual bill | Full-year log of work hours and usage |
| Phone | Work-use % of annual bill | Full-year log of work hours and usage |
| Cleaning | Work-use % (dedicated home office only) | Receipts + floor area calculation |
| Stationery | Actual cost of work items | Receipts |
Note: you can't use both methods in the same year. Pick one and stick with it. Also, you can only claim expenses you actually paid — if your employer reimburses you for internet or equipment, you can't claim it again on your return.
Equipment and technology
Work-related equipment — computers, monitors, keyboards, webcams, external hard drives — is still deductible. So is office furniture you bought specifically for work, such as a dedicated desk or ergonomic chair. If the item cost more than $300 and you use it partly for personal purposes, you'll need to depreciate it over its effective life (furniture is typically 10 years). Items under $300 with exclusive work use can be claimed immediately.
The instant asset write-off threshold for businesses (not individuals) is a separate story.
A Different Rule for Sole Traders
The Hall ruling specifically involved an employee. Sole traders and self-employed people operate under a different test in the tax law.
Under section 8-1 of the Income Tax Assessment Act 1997, expenses are deductible if they are "necessarily incurred" in carrying on a business. This opens the door to claiming a portion of rent if your home is genuinely your place of business — not just somewhere you do some work, but the dedicated, exclusive base from which you operate.
Examples where rent may still be deductible for sole traders:
- A counsellor who sees clients from a room set aside exclusively for that purpose
- A freelance designer whose home address is their registered business address and primary work location
- A tradesperson who uses a home workspace exclusively for quoting, admin, and planning
The bar is high. The space needs to be set aside exclusively for business, and your home needs to function as your principal place of business. If you're a sole trader who has been claiming home office rent, it's worth discussing this specifically with your accountant — the rules are genuinely different from employees, but the Hall ruling creates additional pressure to document the arrangement carefully.
The High Court Appeal: What to Do in the Meantime
As of April 2026, no formal appeal to the High Court has been lodged. Legal commentators suggest an appeal is possible given the significance of the ruling, but if it proceeds, it's likely to take 12-18 months to be heard and decided.
In the meantime, the Federal Court ruling stands as the current law. For your 2026 tax return:
- If you're an employee: do not claim rent, mortgage interest, council rates, or commuting costs as home office deductions.
- If you're a sole trader: speak to your accountant about whether your arrangement qualifies as a place of business. Don't remove claims automatically — but document them carefully.
- Use the fixed-rate method if you want a straightforward, ATO-endorsed approach with minimal record-keeping.
If a High Court ruling eventually changes the position, you may be able to amend prior returns. But don't bank on it — and don't claim something that's currently off the table in anticipation of a future ruling.
A Practical Checklist for Your 2026 Return
Use this to review what you've been claiming in prior years:
Remove from your 2026 return (employees):
- Any portion of rent or mortgage interest for a home office
- Council rates attributed to home office area
- Insurance attributed to home office area
- Car expenses for commuting to and from your workplace
Keep or add to your 2026 return:
- Fixed-rate method claim (70c/hour × hours worked from home)
- OR actual cost claims for electricity, internet, phone (with substantiation logs)
- Equipment and technology used for work (depreciating assets)
- Office furniture purchased exclusively for work (depreciating assets)
- Stationery and consumables — only as a separate claim if using the actual cost method (already covered by the fixed-rate method)
If you're a sole trader:
- Review your home-as-place-of-business arrangement with your accountant
- Document exclusively-used workspace clearly
When to Get an Accountant Involved
Most employees working from home can handle the fixed-rate method themselves — it's designed to be simple, and the ATO has good guidance on their website.
You'd benefit from professional advice if:
- You're a sole trader claiming home office rent and want to confirm whether the Hall ruling affects your position
- You claimed rent in a prior year and want to know whether you need to amend your return
- Your WFH arrangement is complex (multiple properties, partially rented out, significant tech setup)
- You received a letter from the ATO querying a WFH claim
Bottom Line
The Hall ruling removes rent and commuting from the list of deductible WFH expenses for employees — full stop. But the 70 cents per hour fixed-rate method is untouched, and equipment, phone, and internet are still claimable with the right records.
Review what you've claimed in the past, update your approach for this year's return, and keep a log of your WFH hours if you haven't already. It's straightforward once you know what's in and what's out.
This article provides general information and is not personal tax advice. Tax law is complex and your circumstances may differ — speak to a registered tax agent for advice specific to your situation.
