Private ruling: Home office occupancy expenses
Date of advice: 19 September 2016
Published: November 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for occupancy expenses in relation to your home office space? | A1: No.


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 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. Normally, expenses associated with a taxpayer's home are private or domestic in nature, and do not qualify as a deduction for taxation purposes. However, where the home has the character of a 'place of business', a deduction may be allowable for a proportion of 'occupancy expenses'. Taxation Ruling TR 93/30 is about home office expenses. Among other expenses, it states the conditions for occupancy expenses in respect of a home office. Occupancy expenses are expenses relating to ownership or use of a home which are not affected by the taxpayer's income earning activities. These include rent, mortgage interest, municipal and water rates and house insurance premiums. | Detailed Reasoning - Home office as a place of business: As a general rule, occupancy expenses are allowable when the part of the home used for income producing activities has the character of 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. A place of business may exist where part of the home is used as a taxpayer's sole base of operations for income producing activities, for example where no other work location is provided to an employee by an employer. | Detailed Reasoning - Occupancy expenses: Paragraph 13 of TR 93/30 states that 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 was necessary to work from home; and • the area of the home is used exclusively or almost exclusively for income producing purposes. It is acknowledged that your situation satisfies the third requirement above, in that the area in your home is used exclusively or almost exclusively for income producing purposes. However, you have stated that your employer provides an office, which is approximately 2 ½ hours travel from your home. The circumstances where part of a home is considered to have the character of a place of business can be contrasted with the more common case where a taxpayer maintains an office or study at home as a matter of convenience (that is, so that he or she can carry out work at home which would otherwise be done at his or her regular place of business or employment). TR 93/30 states that where a taxpayer maintains an office at home as a matter of convenience, the area of the home and the occupancy expenses incurred retain their private or domestic character ( Handley v FC of T (1981) 11 ATR 644 ; 81 ATC 4165 and Forsyth v FC of T (1981) 11 ATR 657; 81 ATC 4157). In your case, it cannot be said that a place of business exists at your home location as your employer does provide an alternate place of business, and it is your personal choice to choose to work from home instead of commuting to the place of work which is provided by your employer. Your case has no 'absence of an alternative place for conducting income producing activities' as was found in Case T48 , 86 ATC 389. The fact that your employer has allowed you to work from home, does not convert your home office to a place of business. Your individual circumstances are acknowledged, however you are not allowed to a deduction for your home office occupancy expenses as they are private in nature.

Relevant facts: You are an employee, and live in a regional town which is approximately a 4-5 hour round trip to your employer's office. | You work from a home office some days of the week depending on work requirements for meetings, events and other critical times of the year. | The home office you work in is 100% for working for your employer, with the exception of a filing cabinet which is for your personal files. | The space is classed as a 'place of work' by your employer, and is subject to health and safety audits by your employer's HR department. | You store and use company stationery, files, documents, reports, data and company computer in this office. | You take regular work related meetings in this office via video link. | Your employer does not have an office space for you to use in your town. | Your office space is a room which comprises 20% of the floor space.