A landmark decision handed down by the Full Federal Court of Australia in April 2026 has confirmed one of the most important and frequently misunderstood principles in Australian tax law: an employee cannot claim their rent as a tax deduction for a home office, even if they were legally required to work from home.
The case, Commissioner of Taxation v Hall [2026] FCAFC 43, arose from the COVID-19 pandemic and the restrictions that forced many employees to work from home during the 2021 income year. The ATO had disallowed the taxpayer’s claims, the Administrative Review Tribunal later allowed them, and then the Full Federal Court reversed the Tribunal’s decision and sided with the ATO.
The ATO has since issued an interim decision impact statement confirming that the decision supports its longstanding views on home office and travel deductions and that it will continue to administer the law accordingly, pending any further appeal.
This article walks through the facts of the case, the legal reasoning of the court, and what the decision means for employees who work from home today.
Case Summary
| Case name | Commissioner of Taxation v Hall [2026] FCAFC 43 |
| Court | Full Federal Court of Australia |
| Decision date | April 2026 |
| Taxpayer | Nathaniel Hall, sports presenter and producer employed by the ABC |
| Income year in question | Year ended 30 June 2021 |
| Claims made | Proportion of apartment rent (~$5,878) and car expenses (~$1,148) |
| Tribunal outcome | Both deductions allowed |
| Full Federal Court outcome | Both deductions disallowed. ATO appeal allowed. |
The Background: Who Is Nathaniel Hall and What Did He Claim?
Nathaniel Hall (also referred to in media reporting as Ned Hall) was employed full-time by the Australian Broadcasting Corporation as a sports presenter and producer in Melbourne. During the 2021 income year, his role consisted of two distinct parts:
- The Digital Role: This involved producing content for the ABC Sport Digital Radio station. Due to Victorian Government and ABC directives issued in response to COVID-19, Hall performed this role almost entirely from the second bedroom of the apartment he rented with his wife in Melbourne’s inner eastern suburbs. He had no choice about this arrangement.
- The Live Role: This involved producing live sports broadcasts, mainly NRL football. This role needed to be performed from the ABC’s Southbank Studios, for which Hall was required to obtain travel permits under the pandemic restrictions in place at the time.
Hall’s estimates placed his Digital Role at approximately 75 per cent of his total workload and his Live Role at approximately 25 per cent. On days when he performed both roles, he drove from his home to the ABC studios at Southbank.
Based on this arrangement, Hall made two deduction claims in his 2021 income tax return:
- Occupancy expenses: Approximately $5,878 in rent, being the proportion of his total apartment rent referable to the floor area of the second bedroom used as a home office.
- Car expenses: Approximately $1,148, calculated using the cents-per-kilometre method, for the trips he made between his home and the ABC’s Southbank Studios on days when he performed both roles.
The ATO disallowed both claims. Hall challenged that decision, and the Administrative Review Tribunal initially found in his favour. The ATO then appealed to the Full Federal Court.
What the Administrative Review Tribunal Decided
The Tribunal allowed Hall’s deductions in full. Its reasoning was as follows:
On the rent claim, the Tribunal found that Hall’s home office was effectively his ‘workplace for the year’ because COVID-19 restrictions required him to earn most of his income at home. It concluded that a proportion of the rent was incurred in gaining assessable income and was not purely private or domestic in nature.
On the car expenses claim, the Tribunal accepted Hall’s argument that when he drove from his home to the Southbank Studios on days when he performed both roles, he was ‘at work the entire time’, so his travel was ‘on work’ rather than ‘to work’. On that basis, the Tribunal considered the travel to be deductible.
The Tribunal’s decision attracted significant attention because it potentially opened the door for employees across Australia who had been required to work from home during the pandemic to claim a portion of their rent as a deduction. The Full Federal Court’s subsequent decision closed that door firmly.
What the Full Federal Court Decided and Why
The Full Federal Court unanimously allowed the ATO’s appeal and disallowed both of Hall’s claims. The court’s reasoning on each deduction is worth understanding in detail.
Part 1: The rent claim and the ‘essential character’ test
Australian tax law under section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for losses or outgoings incurred in gaining or producing assessable income, provided the expense is not private or domestic in nature.
The Tribunal had accepted that Hall’s rent had a connection with his income-earning activities. But the Full Federal Court emphasised that this is not the end of the inquiry. The court held that the positive limb and the negative limb of section 8-1 operate cumulatively. That is, even if an expense passes the first test (it is connected with earning income), it must also pass the second test (it is not private or domestic in its essential character).
The court found that the essential character of the rent Hall paid was to secure domestic accommodation for himself and his wife. The COVID-19 restrictions that required him to work from home did not alter that essential character. The rent was, at its core, the cost of having a home. The fact that he used part of that home for work did not transform the nature of the expense.
| The key legal principle on occupancy expenses
An expense may have a connection to income-earning activities and still be non-deductible if its essential character is private or domestic. The court confirmed that this outcome does not change when working from home is compulsory rather than voluntary. The ATO’s Taxation Ruling TR 93/30 on home office deductions reflects this principle and remains current law following the Full Federal Court’s decision. |
Part 2: The car expenses and the ‘to work’ versus ‘on work’ distinction
The second issue before the court was whether Hall’s travel from his home to the ABC Southbank Studios on days when he performed both roles was deductible as a work-related car expense.
The Tribunal had applied the concept that because Hall was working from the moment he left home, his travel was ‘on work’ rather than ‘to work’. The Full Federal Court rejected this approach entirely.
The court affirmed the longstanding principle that travel from a taxpayer’s home to their regular place of employment is travel ‘to work’, not travel ‘on work’. It is a prerequisite to earning income, not an activity undertaken in the course of earning it. This principle applies regardless of whether the employee also performs work duties at home before leaving.
The ATO’s interim decision impact statement confirmed: ‘The Full Federal Court decision confirms that this treatment will not change even if the travel occurs during work hours. The decision also confirms that the circumstances of COVID-19 lockdowns requiring some work to be undertaken at home do not change this outcome.’
| Why commuting remains non-deductible
The ATO’s position, now confirmed by the Full Federal Court, is that travel from home to a regular place of work is not deductible because these expenses are incurred as a prerequisite to earning income, not in the course of earning it. The ATO Taxation Ruling TR 2021/1 on employee transport expenses sets out these principles in detail and remains authoritative. |
What This Means for Employees Who Work from Home Today
The decision in Hall does not affect all working from home deductions. It specifically confirmed that employees cannot claim occupancy expenses such as rent as a tax deduction, and cannot claim travel from home to their regular workplace. However, there are still legitimate deductions available to employees who work from home.
| Employees CAN generally claim | Employees generally CANNOT claim |
|---|---|
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The fixed rate method for running expenses
For the 2024-25 income year, employees can claim a fixed rate of 70 cents per hour for each hour they genuinely work from home. This rate covers electricity, gas, internet, phone usage, stationery, and computer consumables. Equipment like a desk or computer is claimed separately.
You do not need a dedicated home office to use this method. You must, however, keep a record of the actual hours you worked from home during the entire income year. The ATO will not accept estimates. Records can be in any form provided they are kept as you go, such as timesheets, rosters, or diary entries.
Full details on how to calculate your working from home deduction are available on the ATO’s working from home expenses page.
Could the Decision Be Appealed Further?
At the time of publication, legal experts have noted that the case received test case funding, meaning the litigation was government-funded due to its significance as a test case on an important area of tax law. This raises the possibility that Hall or another party could seek leave to appeal to the High Court of Australia.
The ATO has stated that pending the outcome of any appeal process, it will continue to administer the law in accordance with the Full Federal Court’s decision. This means the current legal position, as confirmed by the Full Federal Court, applies now. Any change would require a successful High Court appeal.
| Note on the status of this decision
The Full Federal Court decision in Commissioner of Taxation v Hall [2026] FCAFC 43 is current law as of May 2026. The ATO has confirmed it is applying the decision immediately. If the case is appealed to the High Court, this article will not reflect any changes that may result from that process. If you believe this decision affects deductions you have claimed in prior years, seek professional advice before taking any action. |
Frequently Asked Questions
Does this decision affect working from home deductions I claimed during COVID-19?
The Full Federal Court’s decision specifically concerned the 2021 income year. If you claimed similar occupancy expenses such as rent in your own tax returns during COVID-19 years and those returns have not been reviewed, there is a risk that the ATO may look at those claims in light of this decision. If you are concerned, speak with a registered tax agent to assess your position.
Does this decision mean all working from home deductions are gone?
No. The decision specifically addresses occupancy expenses (rent, mortgage interest, insurance, rates) and commuting costs. Running expenses such as electricity, internet, phone usage, and equipment depreciation remain fully deductible to the extent they relate to actual work performed at home.
What if I am self-employed and work from home?
The rules are different for self-employed individuals and business owners. Where a home is genuinely used as a place of business (for example, where no other office or work location is provided), a proportion of occupancy costs may be deductible. The ATO’s guidance on home-based business expenses covers how this applies to sole traders. The rules for employees, as confirmed in Hall, are stricter.
Can I still claim car expenses for travel between two workplaces?
Yes. Travel between two separate workplaces (for example, from one employer’s premises to another’s) is generally deductible as work-related car travel. The Hall decision concerned travel from a home, which the court treated as a private residence rather than a workplace, to a regular employer’s premises. Travel between two separate employer-provided workplaces is a different situation.
What records do I need to keep for working from home deductions?
For the fixed rate method, you need to keep a record of every hour you worked from home during the income year, plus at least one bill for each type of expense covered by the rate (such as an electricity bill and an internet bill). For the actual cost method, you need detailed records of all expenses and a diary or log showing the proportion of work-related use. Keep all records for at least five years.
How JMB Consultants Can Help
The rules around what employees can and cannot claim as working from home deductions are not simple, and the Full Federal Court’s decision in Hall has made the boundaries clearer but also stricter. If you have been claiming home office expenses and are unsure whether your claims are consistent with the current legal position, it is worth having your returns reviewed before the ATO does it for you.
At JMB Consultants, we help individuals and employees review their deduction claims, calculate working from home expenses correctly, and understand how recent court decisions and ATO rulings apply to their circumstances.
Contact JMB Consultants to discuss your working from home deductions with an experienced tax accountant.
Disclaimer: This article is intended as general information only and does not constitute legal or financial advice. The case summary and legal principles discussed are based on publicly available information about Commissioner of Taxation v Hall [2026] FCAFC 43 and ATO guidance current as of May 2026. The case may be subject to further appeal. Individual circumstances vary, and you should seek professional advice tailored to your specific situation before making any deduction claims or amending prior returns.