Maximising Tax Benefits: Owner-Occupied Home Loan Deductions Explained

A lot gets written about the tax deductions available in Australia for property investors. Negative gearing is often on the parliamentary discussion table, with the left often pushing for limiting or even outright banning negative gearing to help more Australians own their own home. The tax benefits that already exist for owner occupiers are less widely discussed, but remain significant. If you own your own home, there are potentially several tax breaks available that you should know about.

Tax deductions for homeowners in Australia

Home office expenses

Australians who work from home can generally deduct any work-from-home related costs from their taxable income. The general rule of thumb for tax is that any expense in the name of generating income is deductible. That means office chairs, laptops, stationery, even electricity and internet bills. However, the rules specify that you can only claim the portion of these costs that went towards work, so you wouldn’t be able to claim your entire electricity bill for example. This can get a bit complicated to work out so the ATO offer a shortcut called the ‘Fixed rate’ method. As of the 23/24 financial year, the fixed rate is 67 cents for every hour you work from home. This is supposed to cover internet, electricity, gas, and consumables like ink. Larger purchases, like a new monitor for example, need to be deducted separately, so it’s important to hold on to receipts to substantiate these claims come tax time. Expenses under $300 can be deducted in full, while larger purchases are claimed via depreciation.

In some circumstances, homeowners who work from home can also claim back a portion of their occupancy expenses. This includes the interest on mortgage repayments, council rates, land tax and home insurance. To be eligible, you’ll need to demonstrate to the ATO that you have no alternative, but to work from home, and that the area you use is exclusively for work. For example, imagine a self employed sound engineer who converts a room into a studio to work out of. If the room in question was 10% of the total area of the house, the engineer in question might be able to deduct 10% of his/her occupancy expenses. Again, this requires detailed records. The ATO might need to see some of the following:

• A floor plan, with the working space clearly marked
• Bank statements for mortgage repayments
• Land tax notices (and evidence of payment)
• Water and council rates receipts
• A record of any time that the working space was used for something other than work

Renting out a room

If you rent out a room in your home, you can claim any expenses that relate to the room and the tenant. This includes occupancy expenses like interest on mortgage repayments and council rates, but again this only applies for the portion of the house being rented out, and during the tenancy. This also applies to short term stays like Airbnb.

The only catch is renting out a room renders you ineligible for a capital gains tax exemption when the time comes to sell the property.

Duty concessions

Certain new homeowners may be able to take advantage of some of the stamp duty concessions available in Australia. Stamp duty, sometimes called transfer duty, is usually charged whenever property changes ownership. It can be a significant expense: someone buying a property in NSW worth $750,000 can expect to pay $28,485 in stamp duty (per the Your Mortgage stamp duty calculator). However, each state/territory has concessions or even exemptions that apply for certain homebuyers.

*All information accurate as of March 2024

Capital gains tax exemption

When the time comes to sell your home, capital gains tax exemptions may apply. Capital gains tax (CGT) is generally levied on the profit made from selling something for more than it was purchased. When investors sell a rental property for example, CGT generally applies. An exemption from CGT applies for Aussies selling their home, or ‘principal place of residence’. To be eligible for the exemption, you’ll need to:

• Have lived in the property the entire time you’ve owned it
• Not have used it to generate income (if a room has been rented out for example, the exemption does not apply)
• Be selling a property no larger than two hectares

Top refinancing home loans

Below are some of the most competitive refinancing home loans for owner-occupiers.

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Lender	Home Loan	Interest Rate	Comparison Rate*	Monthly Repayment	Repayment type	Rate Type	Offset	Redraw	Ongoing Fees	Upfront Fees	LVR	Lump Sum Repayment	Additional Repayments	Split Loan Option	Tags	Features	Link	Compare
loans.com.au	loans.com.au Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)	6.04% p.a.	6.06% p.a.	$2,408	Principal & Interest	Variable			$0	$530	70%				Featured Online ExclusiveUp to $4k cashback	Immediate cashback upon settlement $2000 for loans up to $700,000 $4000 for loans over $700,000	More details	Compare
Unloan	Unloan Variable Rate Home Loan LVR < 80%	5.99% p.a.	5.90% p.a.	$2,396	Principal & Interest	Variable			$0	$0	80%					A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.	More details	Compare
ubank	ubank Neat Variable Home Loan (Principal and Interest) (LVR < 60%)	6.14% p.a.	6.16% p.a.	$2,434	Principal & Interest	Variable			$0	$250	60%					Find out your loan eligibility in 2 minutes or less Complete your application in less than 20 minutes Low fees and fast approval times	More details	Compare
Up	Up Home Variable (Principal & Interest) (LVR ≤ 90)	5.95% p.a.	5.95% p.a.	$2,385	Principal & Interest	Variable			$0	$0	90%						More details	Compare
Tiimely Home	Tiimely Home Live-in Variable Loan Home Loan (Principal and Interest) (LVR < 90%)	5.94% p.a.	5.95% p.a.	$2,383	Principal & Interest	Variable			$0	$0	90%						More Details	Compare

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