The ATO Just Shut Down a Big WFH Tax Claim. Here’s What Employers Need to Know.

If you have staff working from home, you have probably fielded questions about what they can and cannot claim at tax time. And after a recent Federal Court ruling, the answer just got a lot clearer.

The short version? The ATO won. And it matters for how you talk to your team about WFH and tax deductions.

What Actually Happened

An ABC Sports presenter, Ned Hall, worked partially from home during 2021 due to COVID restrictions. He claimed nearly $6,000 in rent expenses for a second bedroom he used as a home office, plus car travel between home and the ABC’s Southbank offices.

The Administrative Appeals Tribunal originally sided with him. The ATO appealed. And the Federal Court has now backed the ATO, rejecting both claims.

The Court’s reasoning was blunt: using a room for work does not turn your rent into a business expense. The bedroom was still domestic accommodation. Full stop. And the commute to the office was travel to work, not travel in the course of work. Two very different things.

Why This Matters for Your Business

You might be thinking, “That’s an employee tax issue, not mine.” Fair point. But here’s where it does land on your desk.

When employees are confused about what they can claim, they often turn to their employer first. And if your business has people working hybrid or fully remote, you will get the questions. Better to have a straight answer ready than to fumble it or give advice that turns into a problem later.

A client of ours recently had exactly this situation. A small professional services firm with about 20 staff went fully remote during COVID and never really came back to the office full time. When tax season rolled around, several employees asked whether the company could reimburse home office costs as a tax-free benefit, or whether they could claim rent expenses themselves.

We helped them get clear on what employees could legitimately claim (the ATO’s fixed rate method is still available, and it is the safest, simplest option), and what the business could and could not do. It saved the business from making commitments it should not have, and gave employees a clear, honest answer they could actually use.

What Employees Can Still Claim

Just because this case failed does not mean WFH deductions are off the table entirely. Employees can still claim:

• The ATO’s revised fixed rate method (67 cents per hour worked from home), which covers energy, internet, phone and stationery
• Decline in value of equipment like laptops or office furniture, where those assets are used for work
• Costs directly related to their work, where they can prove it

What they cannot claim is rent, mortgage interest, or a proportion of their home costs simply because they work from some part of it. That is the line the Court has now made very clear.

The Bit That Is Still Up in the Air

Legal experts have flagged that the case could still head to the High Court. So this is not necessarily the final word. But until that changes, the current rules stand, and employees should not be banking on a different outcome.

What You Should Do Now

If your team is hybrid or remote, now is a good time to:

1. Point employees to the ATO’s official guidance on WFH deductions before they start guessing
2. Make sure your business is not making informal promises about reimbursements without getting proper advice first
3. Review your WFH policy, so it is actually current and reflects how your team works today

WFH is here to stay for many businesses. The rules around it are not always simple, but they are a lot clearer after this ruling.

If you are not sure how WFH arrangements in your business stack up from an HR or policy perspective, we can help you get that sorted. No fluff, no drama, just practical advice that works.

Get in touch with the team at HR Gurus today.