Private ruling: Work related expenses - Home office
Published: October 2015
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2015

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

Relevant facts and circumstances: You commenced your employment in 20XX. Your role involves working at home for four days a week via email and phone. You work one day at the head office doing training and you are not approved to make client calls during these days. You are a part of a team of trainers who all work from home. There aren't sufficient facilities for you to do your work at the head office and it has been communicated to you at the time the role was advertised that the role is a work at home role. You use one room of your home as your designated office with a desk, chair, computer and other office equipment. The room has not been used for any other purpose nor do you intend to use it for another purpose.

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 all 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 that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. As a general rule, expenses associated with a taxpayer's home are of a private or domestic nature and are not tax deductible. However, in the case of a home office, there are two exceptions to this general rule. A deduction may be allowable if: 1. Part of the home is used for income producing purposes and has the character of a 'place of business' or 2. Part of the home is used in connection with a taxpayer's income earning activities but does not constitute a 'place of business'. Taxation Ruling TR 93/30 states that home office expenses can be divided into two broad categories: • Occupancy expenses which relate to the ownership of a home such as rent, rates and insurance. • Running expenses which relate to the use of the facilities within the home such as electricity. Paragraph 7 of TR 93/30 goes further and says that if an area of the home has the character of a 'place of business' then some part of both occupancy and running expenses may be deductible. However, where an area of the home is simply used in connection with income producing activities, but does not have the character of a place of business, only running expenses are allowable. A place of business will exist only if: • it is a requirement inherent in the nature of the taxpayer's activities that the taxpayer needs a place of business • the taxpayer's circumstances are such that there is no alternative place of business and it is necessary to work from home, and • the area of the home is used exclusively or almost exclusively for income producing purposes. | Detailed Reasoning - Application to your circumstances: Based on the distinctions outlined in TR 93/30, we consider that part of your home is a 'place of business' as there is no suitable alternative for you to work at your head office, it is necessary for you to work at home and that area of the home is used exclusively for income producing purposes. Subsequently, you can claim deductions under section 8-1 of the ITAA 1997 for occupancy for your home office.