Tax experts say proposed work from home laws could trigger new tax for workers

Proposed laws to enshrine working from home could allow the state government to hit Victorians with another tax, experts warn.

Jacinta Allan’s contentious new legislation, to make working from home a guaranteed right, could see Victorians face land tax bills if they take up the offer on a permanent basis.

Homeowners are currently exempt from the tax on a primary place of residence, but the exemption doesn’t apply where “substantial business ­activity” is being carried out from the home.

Tax experts say permanent working from home arrangements could trigger the tax for workers, especially freelancers or contractors.

Already people running businesses from home are being pursued for the tax, or a percentage of it relevant to the business use at their home – ­examples provided by the State Revenue Office include a hairdresser who converts their garage into a hair salon, a web designer who uses one room exclusively for business activities, or a homeowner who grants a lease or licence to another person to store records or other business-related ­materials.

Now there are concerns employees of private companies and public servants could cop the tax, prompting calls for clarity around the issue.

The SRO last issued a ruling on the issue in 2013.

It said a worker was “unlikely” to ­attract land tax on their home office if they carried out “most” of their paid work at their employer’s business premises and only worked from home from “time to time”.

Barrister Emma Mealy – an expert in state taxes who worked at the SRO – said there was definitely scope for employees working two or more days from home to be caught in the tax trap.

“It appears that it makes no difference to the commissioner as to whether a person works from home for their own business purposes or as part of their employment,” she said.

“For home office arrangements, the commissioner in the ruling focuses on the extent of the business activity carried on in the home office compared with elsewhere, such as the employer’s offices.

“The commissioner also seems to take into account whether the home office is also used for private purposes. Using a home office to carry on a business activity to a ‘significant extent’ may be a factor the commissioner takes into account … however, it is unclear what a ‘significant extent’ is.”

Another tax barrister, who asked not to be named, said self-employed freelancers and contractors were at most risk.

“There is a growing percentage of people working as contractors getting off the payroll because it suits employers.”

Shadow treasurer James Newbury said confusion around the issue needed to be clarified.

But he said the SRO would likely increase enforcement ­efforts once the concept was legislated.

“Jacinta Allan knows that more people working from home will mean more people are caught in her tax net and will be forced to pay land tax,” he said.

“When you conduct one third of your business at home, you pay land tax. Working at home 40 per cent of the time triggers Labor’s tax net on your private home.”

Asked about the potential for employees to be slugged land tax, a government spokesman said there would be no changes to existing tax settings.

( Source : Herald Sun Shannon Deery and Alex White 25 August 2025)