Learn how to claim home office deductions, running costs, occupancy expenses and motor vehicle costs for your small business in Australia. This easy guide covers information for sole traders and companies, helping you maximise tax deductions while staying ATO-compliant.
A home-based business is when part of your home is set aside and used mainly for running your business. There are three main deductible home costs:
You can only claim the portion that relates to your business use.
These are the everyday costs of keeping your home workspace comfortable and functional.
Tax tip: You can claim running expenses even if you don’t have a dedicated business area.
These cover costs for owning or renting your home, such as mortgage interest, rent, council rates, land tax and home insurance.
You can only claim occupancy expenses if part of your home has the “character of a place of business”, meaning:
Tax tip: If your home does not meet these criteria, you can still claim running expenses but occupancy expenses are not deductible.
Tax warning: There may be other tax implications when you claim occupancy expenses.
Capital Gain Tax (CGT)
Claiming occupancy expenses can affect your CGT when selling your home. You may lose part of your main residence exemption for the business use portion. CGT concessions may apply, but the rules are complex – professional advice is recommended. More information is available on the ATO website.
Personal Services Income (PSI) rules
If your business generates PSI, you may not be able to claim occupancy expenses. More information is available on the ATO website.
If you travel for business from home, you can claim motor vehicle expenses. Travel examples include:
The vehicle must be owned, leased or under a hire purchase agreement to claim expenses.
Sole traders can claim all three types of expenses using ATO-approved methods.
Sole traders can claim these using any of the following methods:
Fixed rate method Claim 70 cents per hour worked from home (FY2024–25) for energy, phone, internet and stationery. Depreciation on office equipment is claimed separately. Keep a record of hours worked.
Floor area method If you have a dedicated room, calculate the business portion by dividing the area used for business by the total home area, and apply that percentage to relevant costs. This method is often the most appropriate method to work out the business portion of running expenses, such as utilities bills.
Actual cost method Use actual receipts and bills for additional business expenses, then calculate the business portion based on usage. Requires detailed records.
Tax tip: Not sure which method to use? Try calculating your expenses using each option and pick the one that works best for your situation.
You can only claim these if part of your home has the “character of a business place.” Work out the business portion based on the floor area used.
For more guidance on claiming home office expenses as a sole trader, visit the ATO website.
How you claim depends on the type of vehicle you use for business travel from home.
Cars Vehicles like sedans, station wagons and small 4WDs (under 1 tonne and fewer than 9 passengers) can be claimed using:
Claim up to 5,000 business km per year at 88 cents/km (FY2024–25 and 2025–26). No logbook required, but keep a reasonable record of trips.
Keep a 12-week logbook to calculate the business use percentage of all car expenses, including fuel, servicing, insurance, registration and depreciation.
Other Vehicles Vehicles like utility trucks, panel vans, minivans, buses or motorcycles (1 tonne or more, or 9+ passengers) must use the actual cost method. Total all vehicle expenses and apply the business use percentage based on a logbook or accurate records.
You can choose one method per vehicle per year and keep clear records to support your claims.
Tax tip: Looking for a logbook template? The ATO’s myDeductions app helps you keep a digital logbook in multiple ways. You can start a GPS-tracked trip (great for real-time business travel), enter point-to-point trips or record odometer readings.
If your business is run as a company, claiming home office expenses works differently.
The company must have a genuine, market-rate rental agreement with the property owner (even if that’s you).
For more guidance on claiming home office expenses as a company, visit the ATO website.
Tax warning: If there’s no rental agreement and the company reimburses home office expenses to you as an employee, you cannot claim them personally. The company may also need to pay Fringe Benefits Tax (FBT). More information is available on the ATO website.
You must use the actual costs method to work out motor vehicle expenses, regardless of the type of motor vehicle. Add up all vehicle expenses and apply the business use percentage from a logbook or accurate records.
Claiming small business home office deductions in Australia can help you save on tax while running your business from home, but accurate record keeping is essential. Without records, claims may be challenged or disallowed.
The ATO requires you to keep supporting records for at least 5 years including, but not limited to:
With ANNA Money you can quickly search for relevant transactions, and upload receipts or bills directly to them. The smart receipt feature makes it even easier by automatically extracting key details and matching them to the correct transaction. You can also add notes, like business usage percentages, to keep everything organised.
And if you ever need help, our team is just a message away in the in-app chat.
ANNA +Taxes is available for newly registered companies - first 1,000 customers get 6 months free. We auto-categorise your transactions and take care of your lodgements.
Register Now
.svg)
