Private ruling: Work Related Expenses - Deductions - Home Office Expenses
Date of advice: 7 September 2016
Published: October 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim home office expenses, including occupancy expenses and running expenses under sub-section 8(5) of the Income Tax Assessment Act 1997 ? | A1: Yes

Relevant facts and circumstances: You are employed. Your employer acknowledges that you do not work onsite and that you do not have an allocated desk or office in their premises. You work full time five days per week from your established home office A single room has been allocated from your rental property for the sole function of an office. You have equipped the office at your own expense. The area is used regularly for clients and customers to visit.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Division 900

Reasons for decision: Summary: You are entitled to claim a portion of both your running and occupancy expenses as your employer acknowledges that you do not work onsite and that you do not have an allocated desk or office in their premises. | Detailed Reasoning - Detailed reasoning: 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 or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. A deduction under this general deductions provision is only allowable if: • the expense is actually incurred • has the relevant connection with your income • meets the substantiation requirements of Division 900 of the ITAA 1997. Taxation ruling TR93/30 outlines the factors that indicate whether or not a home office has the character of a place of business. This likely to be the case where part of a residence is set aside exclusive for the carrying on of a business as the sole basis of operation for an employee who has no other work location provided by their employer. Where a home office has the character of a place of business, a proportion of running expenses and occupancy expenses can be claimed as a deduction. Running expenses can include heating, cooling, lighting, and the decline in value of office furniture. Occupancy expenses include rental expenses. An apportionment of the area of the residence used for business use is usually done on a floor area basis. Individual taxpayers who claim home office expenses are required to be able to prove that they have incurred such expenses. Such taxpayers must also be able to establish a connection between the use of their home office and their work or business. Practice Statement PSLA 2001/6 provides that a diary covering a representative four week period for expenses claimed would establish a pattern of usage for that year. Adjustment should be made for periods when the home office is not used for income production, such as holidays and illnesses. | Detailed Reasoning - Application to your circumstances: In your situation as you do not have an allocated work space provided by your employer, and you have allocated a room for exclusive use as a home office you are therefore able to claim apportioned expenses for occupancy and running costs.