Private ruling: Home office expenses
Published: November 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for occupancy expenses incurred in operating your home office? | A1: Yes

Relevant facts and circumstances: You are employed in the medical industry by multiple employers. Your home address is registered with Medicare as a medical practice and you have a Medicare issued provider number for the address. However due to your type of work it is unusual to see clients at your home office. This is mainly due to the extra-mural nature of duties being consulting, on-call cover and administration. The client visits are usual arranged for another location. You estimate that a high percentage of your salaried employment duties are performed from your home office. You have a designated office at your home. There is a large workspace with multiple computers and printers. Your home office has been specifically designed as an office and is rarely frequented by others. Cleaners also have access to the area. The area is not "homely" and is meant to be used strictly for business. There is no signage for the office, but the area is well recognisable as a work area.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income. For a deduction to be allowable for home occupancy expenses, the expenses must satisfy the requirements of section 8-1 of the ITAA 1997. Generally, expenses associated with a taxpayers home are private or domestic in nature and therefore do not qualify as allowable deductions for taxation purposes. However, where the home is used for income producing activities and has the character of a place of business, a deduction may be allowable for a portion of rent relating to use of a home. 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. Taxation Ruling TR 93/30 outlines the following factors that the Commissioner believes indicate whether or not a home office 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 income producing purposes, and · the area is used regularly for visits of clients or customers. The Commissioner believes that none of these factors in themselves will necessarily be conclusive in determining the character of an area as a home office. Rather, the decision in each case will depend upon a balanced consideration of the essential character of the area, the nature of the taxpayer's business and any other relevant factors. If an area of the home has the character of a place of business, as per the criteria set out above, then a portion of the occupancy expenses may be allowable as a deduction under section 8-1 of the ITAA 1997. In your case, you have a designated home office space that will be used exclusively or almost exclusively for income producing purposes. The room is not readily suitable or adaptable for private or domestic use. While the area is not used for client visits or identifiable via signage as a place of business, the area is considered as a place of business in your circumstances. Therefore you will be entitled to a deduction for a portion of your occupancy expenses under section 8-1 of the ITAA 1997. Apportionment - Occupancy expenses To calculate a deduction for occupancy expenses, it is necessary to apportion expenses between private and business/employment use. In most cases apportionment of expenses should be made on floor area, and in addition, where the area of the home is a place of business for only part of the income year, a time basis.