Private ruling: Home office and travel expenses
Published: May 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: A1: Yes | Q1: Are you entitled to a deduction for your home to work travel? | A2: Yes

Relevant facts and circumstances: You are employed by a company which has its head office interstate. As you work in a national role and do not reside in City A or near any regional offices you are required to work from home. The company has paid for the setting up of the office with computers and printers and has provided a corporate card for paying for incidentals like paper, computer ink and general stationary. You pay for internet and electricity expenses. The office is solely used for work purposes and you have a separate area in the house for the families internet and computer use. You spend a few days days a week in the office (at home) and are out seeing clients or travelling to City A for meetings on the other days. On the days you go to visit clients you are in the office preparing your presentation and return to the office at the end of the day to finalise the orders. You maintain a log book for vehicle expenses.

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( ITAA1997 ) 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, or a provision prevents you from deducting it. Generally, expenses associated with a taxpayers home are private or domestic in nature and therefore do not qualify as allowable deductions for taxation purposes. For a deduction to be allowable for home occupancy expenses, the expenses must satisfy the requirements of section 8-1 of the ITAA 1997. | Detailed Reasoning - Home constitutes 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. 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 existence of any of these factors or a combination of them will not necessarily be conclusive in determining whether the home constitutes a place of business in the ordinary and common sense meaning of the term. The determination will depend on a balanced consideration of the essential character of the area, the nature of the taxpayer's business and any other relevant factors. On a balanced consideration of the facts surrounding your circumstances, we consider that your home office does constitute a place of business. The deductible expenses in respect of a home office can be divided into two broad categories: • Expenses relating to ownership or use of a home which are not affected by the taxpayer's income earning activities (i.e., occupancy expenses). These include rent, mortgage interest, municipal and water rates, land taxes and house insurance premiums. • Expenses relating to the use of facilities within the home (i.e., running expenses). 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. Therefore as the area of your home is considered a 'place of business', you are entitled to the expenses you actually incur. | Detailed Reasoning - Travel expenses: A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. (see paragraph 77 of Taxation Ruling TR 95/34) However, there are situations where it has been accepted that travel by employees from home to work is deductible Travel expenses are deductible where an employee travels between home based employment and another place of employment. Paragraph 56 of TR 95/34 states that an employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. In your case your home is considered to be a base of operations as your work commences before or at the time of leaving home. Consequently, you are considered to be travelling between two places of employment. Therefore you are entitled to claim a deduction for the travel expenses between your home and work.

Subject: Home office and travel expenses: Are you entitled to claim a deduction for the occupancy expenses of a home office used exclusively for carrying on a business?