The short answer
Most people who claim a working-from-home deduction don't lose any of their main residence CGT exemption. The trigger isn't whether you claim — it's whether part of your home has the character of a "place of business". For typical employees working from home some days a week under an employer's flexible-work arrangement, the answer is almost always: no impact.
You may be remembering an older rule, or one that applied to sole traders running a business from a dedicated home office. The principle hasn't changed — but the population it actually catches is much smaller than it sounds.
The two-method rule
NestWise's free WFH calculator lets you compare both methods side-by-side. Here's how each interacts with CGT:
| Method | What it covers | CGT impact at sale? |
|---|---|---|
| Fixed rate (70¢/hr FY26-27) | Electricity, gas, internet, phone, stationery — all bundled | None. Doesn't create "place of business" character. |
| Actual cost — running expenses only | Same categories, apportioned per actual usage | None in most cases. Same logic — apportioning a power bill to "work use" doesn't make your home office a place of business. |
| Actual cost — occupancy expenses | Mortgage interest, rates, insurance, repairs — apportioned by floor area | Yes — only allowed where you have a place of business character, and triggers partial loss of main residence exemption. |
The third row is the one that matters. Most employees can't claim occupancy expenses at all (only sole traders or people whose employer doesn't provide a workspace), so they never encounter the CGT issue.
When the "place of business" test IS met
Per the ATO, all of the following typically need to be true:
- The nature of your income earning activities requires you to have a place of business — e.g. you see clients there, or store significant business inventory.
- It was necessary to work from home because your employer doesn't provide an alternative workspace — or you're running your own business.
- The area is set aside and used exclusively as a place of business — not "the kitchen table during work hours".
- Additional indicators also help, like a sign at the door, a separate entrance, a dedicated business phone line, fixtures suited only to business use.
Working from home one or three days a week because your job is flexible? You don't meet this test.
Running a graphic design business out of a converted garage with its own entrance and a logo on the door? You probably do.
When the test is NOT met
The ATO is clear: merely working from home occasionally or by choice doesn't qualify for special CGT treatment. That covers:
- Most remote-work-from-home employees, including hybrid arrangements
- People who work from a corner of the lounge room
- Anyone using the fixed-rate method only
- People who use the actual-cost method for running expenses only (electricity, internet, etc.)
In all of those cases, the main residence exemption stays fully intact.
Hand-trace — three worked examples
Example 1 — Hybrid employee using fixed-rate method
Sam, employee. Works from home 3 days/week, in the office 2 days. Has a small desk in the spare bedroom. Claims under the 70¢/hr fixed rate. Owns the home for 8 years, sells with a $300,000 gain.
- Does the home office have "place of business" character? No — the employer provides an office; the spare room isn't exclusive to work; no clients visit.
- Fixed-rate method alone doesn't trigger CGT.
- Result: $0 of the $300,000 gain is assessable. Full main residence exemption applies.
Example 2 — Sole trader, dedicated workshop
Pat runs a furniture restoration business from a converted garage. The garage is 12% of the property's floor area, has its own entrance, signage, and isn't used for any personal purpose. Pat has owned the property for 10 years and used the garage for the business the entire time. Sells with a $500,000 gain.
- Does the home have "place of business" character? Yes — exclusive use, clients visit, the garage isn't suitable for personal use.
- CGT-assessable portion = 12% (floor area) × 100% (time-period business use) = 12% of the gain.
- Assessable gain = $500,000 × 12% = $60,000 (before any CGT discount or small-business concessions).
- The 50% CGT discount typically halves this to a $30,000 taxable amount; small-business concessions may reduce further. Speak to a registered tax agent.
Example 3 — Employee, actual-cost method, no dedicated business room
Alex, employee, claims actual-cost running expenses (apportioned electricity + internet + stationery). Works from the dining table. No exclusive business area, no clients visit. Owns the home for 6 years, sells with a $200,000 gain.
- Does the home have "place of business" character? No — no exclusive area, dining table is shared.
- Actual-cost method on running expenses alone doesn't trigger CGT.
- Result: $0 of the $200,000 gain is assessable. Full main residence exemption applies.
What to do at sale time
If you've been claiming WFH deductions and you're selling your home:
- Identify which method you've been using. Fixed rate? No CGT issue. Actual cost — running expenses only? Almost always no CGT issue.
- If you've been claiming occupancy expenses (mortgage interest, rates, insurance) — talk to a registered tax agent BEFORE you sell. The CGT calculation is fiddly and the small-business CGT concessions can substantially reduce the bill if you qualify.
- Keep the records — your fixed-rate hours log + bills NestWise tracks at /dashboard/wfh are also relevant when proving the character of use to the ATO.
Why people remember "WFH affects CGT"
The "WFH affects your CGT" headline was widely circulated during COVID when many employees suddenly worked from home full-time. The underlying rule didn't change — the place-of-business test still applied — but the discussion blurred the distinction. For nearly all employees the answer was (and still is): no impact.
If you're a sole trader with a dedicated business area, or you've been claiming occupancy expenses, you might be in the small group where it matters. For everyone else, claim what you're entitled to and don't worry about the sale.
Sources
- ATO — Working from home expenses (occupancy expenses)
- ATO — Home-based business and CGT implications
- ATO — Using your home for rental or business
- ATO — Eligibility for main residence exemption
Review cadence
This guide should be re-verified every 12 months (next due: June 2027) and within 30 days of any ATO announcement that changes:
- The fixed-rate method cents-per-hour figure
- The eligibility rules for occupancy expenses
- The CGT main residence exemption rules (Subdivision 118-B ITAA 1997)
A row has been added to docs/06-rate-change-calendar.md under the "Tax guides — review cadence" section.
Not financial or tax advice. This guide explains the general rules. Your situation may have specific facts that change the outcome — talk to a registered tax agent before relying on this guidance, especially if you're planning to sell.