Private ruling: Work related expenses - home office expenses
Date of advice: 29 October 2015
Published: October 2015
Ruling period: 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to claim a deduction for hotel accommodation expenses if the hotel room is used as an alternative work office? | A1: No.

Relevant facts and circumstances: You are currently employed with Employer X. You reside permanently in City A. You have a home office in your main residence in City A where you work from. You are required to commute on a regular basis from City A to City B, as the work site is in City B. You stay in hotel accommodation whilst in City B and incur a flat rate per night. You use your hotel accommodation as a second office whilst working in City B, in order to work in a quiet environment and maintain flexible work hours. You are not required to keep a timesheet. You are required to work overtime in a flexible manner in order to meet timely deadlines. Your access to the City B office is restricted to the hours of am until pm.

Relevant legislative provisions: Income Tax Assessment Act 1997 s8-1

Reasons for decision: 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 except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 93/30 discusses what is considered a home office and the allowable deductions. Paragraph 5 of TR 93/30 sets out the factors that may indicate if an area has the characteristics 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 a association with the home generally; • The area is used exclusively or almost exclusively for carrying on a business; or • The area is used regularly for visits of clients or customers. The deductible expenses of a home office can be divided into two categories: • Occupancy expenses: expenses relating to ownership or use of a home which are not affected by the taxpayers' earning activities (rent, mortgage, interest, municipal and water rates and house insurance premiums). • Running expenses: expenses relating to the use of facilities with the home (electricity charges, cleaning, depreciation, leasing charges and repairs on items of furniture and furnishings in the office). If the area is considered to have the characteristics of a place of business as outlined in paragraph 5, then some part of the occupancy and running expenses may be claimed as a deduction, as stated in paragraph 7. However, where an area of the home is simply used in connection with income producing activities, but does not have the characteristics of a place of business, only running expenses are allowable if they are incurred and established that the extra expense has resulted from working at home. In your case, your hotel room is not readily identifiable as a place of business. The hotel room is adaptable and is used for private purposes and as a result is not used exclusively for income producing activities. There is nothing to indicate that the hotel room is used regularly to receive visits from clients and or work colleagues. You aren't required to keep a timesheet and are not required to work structured hours; this indicates that the hotel room is used as a place of convenience and not a place of business. As you pay a flat rate per night for accommodation you do not incur any running costs and thus will be unable to demonstrate that the extra expense resulted from working from the hotel room. Therefore, the expenses you incur in relation to hotel accommodation are considered to be private in nature and consequently are not entitled to claim a deduction for a portion of the incurred expense under section 8-1 of the ITAA 1997.