The Full Federal Court has handed down its decision in FC of T v Hall [2026] FCAFC 43 (10 April 2026), significantly clarifying—and narrowing—the scope of deductions available to employees working from home.
From a FBT perspective, this in turn directly impacts the “otherwise deductible” rule in determining the taxable value of expenses paid for or reimbursed to a staff member.
With hybrid and remote work now firmly embedded in modern employment, this case provides timely guidance on what can (and cannot) be claimed
The taxpayer, an ABC employee, worked predominantly from home during the 2021 income year, using a dedicated room as a home office. He claimed deductions for:
The Administrative Review Tribunal initially allowed these claims. However, the Commissioner appealed to the Full Federal Court.
The Full Federal Court allowed the Commissioner’s appeal, denying both deductions. Click here to see ATO summary of decision.
The Court held that rent is fundamentally a private or domestic expense, as it secures accommodation. Importantly, the Court rejected the idea that rent can be split into “private” and “work-related” components simply because one room is used as a home office. Even exclusive work use of a room did not change the character of the expense.
The character of an expense depends on what it secures, not how it is used. Even where working from home is required by the employer, rent remains non-deductible.
Travel between Mr Hall’s home and his workplace was also held to be non-deductible private travel. This was the case even though:
The Court found that work at home and work at the office were separate income-producing activities, and travel between them did not occur “in the course of” earning income.
This decision reinforces a strict approach to employee deductions in a post-COVID, hybrid work environment.
The Court has drawn a clear line:
- working from home—even extensively or by necessity—does not convert private living costs into deductible expenses.
- for most employees, deductions will remain limited to running costs, not occupancy costs
- travel between home and the work place is private in nature.
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