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Edited version of private advice
Authorisation Number: 1051910686459
Date of advice: 18 October 2021
Ruling
Subject: Occupancy expenses
Question
Is the Taxpayer entitled to a deduction for a portion of their rental expense (occupancy expense)?
Answer
Yes
The Taxpayer is a state Sales Manager whose Employer is based in another state. The Employer does not provide the Taxpayer with an office to work from. The Taxpayer is required to use an area of their home to carry out their role, so part of the home is used as the Taxpayer's sole base of operations for income producing activities. The area is exclusively used for the taxpayer's employment activities.
As the area of the home has the character of a "place of business", a portion of the rental expense (occupancy expense) is an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997. However, as the home is being used for both income producing and private purposes, the rental expense will need to be apportioned. The proportion of the rental expense (occupancy expense) should be calculated as a percentage of floor space directly used exclusively for employment activities compared to that of the entire dwelling.
Information about the occupancy expenses and methods for apportioning those expenses can be found in Taxation Ruling TR 93/30 Income tax: deductions for home office expenses.
This private ruling applies for the following period
Year ended 30 June 2021
The scheme commences on:
1 July 2020
Relevant facts and circumstances
Taxpayer has been employed by the Employer as State A Sales Manager on a full-time basis since February 2020.
Taxpayer rents a house with four bedrooms, plus garage located at Capital City A, State A (Home).
Employer does not have an office located in Capital City A, State A.
Taxpayer is required to maintain an office at Home on own expenses to perform the role.
Taxpayer uses one bedroom exclusively as the home office and the garage exclusively for work related activities.
The first page of the Rental Tenancy Agreement was provided for the Home.
A copy of the floor plan was provided for the Home.
A copy of a signed and dated letter from the Employer was provided confirming the Employer does not have office premises in Capital City A, State A and Taxpayer is required to maintain a home office at own expense. Details of the Taxpayer's role and responsibilities were outlined in the letter.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1