Edited version of private advice

Authorisation Number: 1051593155771

Date of advice: 14 October 2019

Ruling

Subject: Work related deductions

Question

Are you entitled to claim a deduction for occupancy expenses in relation to your home office?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a full-time employee as a home customer officer.

You are not a contractor or a business.

You work from a home office at your private residence as your employer does not have an office for you to work from.

Your employment contract states that you are to work from your home.

You live in a 2 bedroom unit and you use the spare bedroom as your home office.

The office has a desk and chair along with other equipment.

Your employer provided you with equipment to use in the home office such as computer and phone.

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.

Occupancy expense

Taxation Ruling TR 93/30 outlines the factors that indicate whether or not a home office has the character of a 'place of business'. This is likely to be the case where part of a residence is set aside exclusively for the carrying on of a business by a self-employed person, such as a doctor or dentist with a surgery or consulting rooms at home or a tradesperson with a workshop at home. Another example is where part of the home is used exclusively as the sole base of operation for an employee and no other work location is provided by the employer.

The following factors may indicate whether or not the area set aside has the character of a 'place of business':

·         The area is clearly identifiable as a place of business

·         The area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally;

·         The area is used exclusively or almost exclusively for carrying on a business; or

·         The area is used regularly for visits of clients or customers.

Taxpayers who maintain an office or study in their homes where they can do income-producing work, but which does not constitute a place of business cannot claim deductions for occupancy expenses, such as mortgage interest, rates, rent, insurance or repairs referable to their home office. However they can claim a deduction for additional running costs.

Application to your circumstances

You work as a home customer officer. You are required to work from home as your employer does not provide you with office space. You use a room in your home as an office.

Therefore, you are entitled to a deduction for occupancy expenses.

Please note, as your home is being used for the purposes of earning your assessable income as well as for private use you will be required to apportion your expenses according to the area of your home that is used for the earning of your assessable income.

For more information with regards to the expenses that you are entitled to claim as a deduction for home office expenses and methods of apportioning those expenses please refer to Taxation Ruling TR 93/30 Income tax: deductions for home office expenses.