Private ruling: Deductions
Date of advice: 17 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for 1/3 rd of total expenses incurred for rent, electricity and internet? | A1: No. | Q2: Are you entitled to a deduction for a reasonable portion of expenses incurred for rent, electricity and internet? | A2: Yes. | Q3: Are you entitled to a deduction for online fees? | A3: Yes.

Relevant facts and circumstances: You and your partner rented an apartment. You and your partner utilised several of the rooms personally and the other room was sub-let. On average a rate of $X was charged per night. This allowed the person to utilise all of the property except the rooms which were for personal use. The rate included electricity, internet and clean linen. You also allowed the person to use the lounge room and kitchen appliances. When the room is not being sub-let you do not use it for personal purposes.

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

Reasons for decision: Detailed Reasoning - Question 1 and 2: If you use your home to produce assessable income you can claim deductions for the associated expenses. If only part of your home is used to earn rent, you're only entitled to claim deductions for the part of your expenses that relate to the assessable income. As a general guide, you should apportion expenses on a floor-area basis - that is, based on the area solely occupied by the tenant, together with a reasonable figure for their access to the general living areas. | Detailed Reasoning - Application to your circumstances: In this case, you and your partner sub-let a single room. It would be unreasonable to claim 1/3 rd of the expenses incurred for rent, electricity and internet as this would not accurately reflect the portion of the home being used for income producing purposes. Rent For the days the room was actually used to earn assessable income we consider it would be more appropriate to determine the floor area of the single room and a reasonable figure for the access to the general living areas as a percentage of the total floor area of the apartment. However, for the days the room was not being used to produce assessable income we consider the entire living area was being used for private purposes. Therefore, for these periods the portion of rent you are entitled to a deduction for should be reduced to the floor area of the single room as a percentage of the total floor area or the property. Electricity and interest On the days where the room was not occupied we consider that 100% of both the electricity and interest expenses were incurred for a private purpose. Therefore, we consider it would be more reasonable to only claim a portion of these expenses on the days the room was actually occupied and being used to produce assessable income. | Detailed Reasoning - Question 3: We accept that the online fees are incurred in the course of producing assessable income. Therefore, you and your partner are entitled to a deduction for these expenses.