| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1013090904150
Date of advice: 15 September 2106
Ruling
Subject: Home office and work expenses
Question 1
Are you able to claim a deduction for occupancy expenses in relation to your home office space?
Answer
Yes.
Question 2
Are you able to claim deduction for running expenses in relation to this home office space?
Answer
Yes.
Question 3
Are you eligible to claim the immediate small business deduction for each asset which costs less than $20,000?
Answer
No.
This ruling applies for the following periods
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on:
1 July 2015
Relevant facts
You are an employee of a business and work solely from a home office in your rented place of residence. Your employer has provided a written statement that your duties are to be carried out from your home office, as the company is not in a position to provide working space for staff.
You are not a contractor or a business, but a salaried employee.
Your home office is used for no other purpose, and most of your work carried out there is by telephone, Email and Skype.
From time to time you have meetings with your employer's representatives at your home office.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
Taxation Ruling TR 93/30 is about home office expenses. It states deductible expenses in respect of a home office can be divided into two broad categories:
n Occupancy expenses, for example, expenses relating to ownership or use of a home which are not affected by the taxpayer's income earning activities. These include rent, mortgage interest, municipal and water rates and house insurance premiums.
n Running expenses, for example, expenses relating to the use of facilities within the home. These include electricity charges for heating/cooling, lighting, cleaning costs, depreciation, leasing charges and the cost of repairs on items of furniture and furnishings in the office.
Home office as a place of business
As a general rule, occupancy expenses are allowable when the part of the home used for income producing activities has the character of a 'place of business'.
Whether an area of the home has the character of a place of business is a question of fact which depends on the particular circumstances of each case. A place of business may exist where part of the home is used as a taxpayer's sole base of operations for income producing activities, for example no other work location is provided to an employee by an employer.
In your case, your employer does not provide a workplace in your state, and it is a requirement of your income producing activities that you have a place of work. It is necessary for you to work from home, and the area in your home office is used exclusively for this purpose. As you have no alternative place of business and it is necessary to work from home, it is considered that your home office is a place of business.
Occupancy expenses
As it is considered your home office is a place of business, you may claim occupancy costs such as a proportion of rent and insurance premiums.
The proportion of rent should be calculated as a percentage of floor space compared to that of the entire dwelling, including garage space.
Insurance premiums should be calculated as a percentage of values of your office and related equipment compared to the value of the other items that are insured under the policy.
Running expenses
Running expenses that are associated with your work are an allowable deduction. It is only the additional expenditure on the running expenses that are incurred as a result of your income producing activities that are allowable. Therefore a portion of electricity charges for heating/cooling, lighting and office equipment, depreciation of equipment, and cost of maintaining/repair of office furnishings may be allowed. It follows you should apportion your running expenses to exclude any hobby or private purpose. Running expenses are based on usage and you may keep a diary for electricity and other utility usage for a month for an example.
Immediate small business discount for each asset costing less than $20,000
As you are a salaried employee and do not run a business, this deduction, which is available only to small businesses, is not available to you.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
