Private ruling: Home office and work expenses
Published: November 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you able to claim a deduction for occupancy expenses in relation to your home office space? | A1: Yes. | Q2: Are you able to claim deduction for running expenses in relation to this home office space? | A2: Yes. | Q3: Are you eligible to claim the immediate small business deduction for each asset which costs less than $20,000? | A3: 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. Taxation Ruling TR 93/30 is about home office expenses. It states deductible expenses in respect of a home office can be divided into two broad categories: n Occupancy expenses, for example, 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. n Running expenses, for example, expenses relating to the use of facilities within the home. 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. | 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 no other work location is provided to an employee by an employer. In your case, your employer does not provide a workplace in your state, and it is a requirement of your income producing activities that you have a place of work. It is necessary for you to work from home, and the area in your home office is used exclusively for this purpose. As you have no alternative place of business and it is necessary to work from home, it is considered that your home office is a place of business. | Detailed Reasoning - Occupancy expenses: As it is considered your home office is a place of business, you may claim occupancy costs such as a proportion of rent and insurance premiums. The proportion of rent should be calculated as a percentage of floor space compared to that of the entire dwelling, including garage space. Insurance premiums should be calculated as a percentage of values of your office and related equipment compared to the value of the other items that are insured under the policy. | Detailed Reasoning - Running expenses: Running expenses that are associated with your work are an allowable deduction. It is only the additional expenditure on the running expenses that are incurred as a result of your income producing activities that are allowable. Therefore a portion of electricity charges for heating/cooling, lighting and office equipment, depreciation of equipment, and cost of maintaining/repair of office furnishings may be allowed. It follows you should apportion your running expenses to exclude any hobby or private purpose. Running expenses are based on usage and you may keep a diary for electricity and other utility usage for a month for an example. | Detailed Reasoning - Immediate small business discount for each asset costing less than $20,000: As you are a salaried employee and do not run a business, this deduction, which is available only to small businesses, is not available to you.

Relevant facts: You are an employee of a business and work solely from a home office in your rented place of residence. Your employer has provided a written statement that your duties are to be carried out from your home office, as the company is not in a position to provide working space for staff. | You are not a contractor or a business, but a salaried employee. | Your home office is used for no other purpose, and most of your work carried out there is by telephone, Email and Skype. | From time to time you have meetings with your employer's representatives at your home office.