Private ruling: Use of home office
Date of advice: 30 August 2016
Published: October 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the home office space used by you for work regarded as a 'place of business'? | A1: No. | Q2: Are you able to claim deduction for occupancy expenses in relation to this home office space? | A2: No. | Q3: Are you able to claim deduction for running expenses in relation to this home office space? | A3: Yes. | Q4: Are you required to apportion deductions for this home office space for private or hobby use, that is, for other use unrelated to your employment activities? | A4: Yes.


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: • Occupancy expenses, i.e., 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. • Running expenses, i.e., 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. 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'. As outlined in paragraphs 12 and 13 of TR 93/30, where there is no alternative place for conducting income producing activities an area of a home may be regarded as a place of business. In your case, in your role as an employee, your employer provides a place of business, and you were working from your home as an alternative for your convenience. Although it is appreciated that you had medical circumstances which rendered you incapacitated for a period, and having the home office space made it possible for you to work from home, your home office is not regarded as a place of business for tax purposes. Your employer has an office where you previously worked. You are not carrying on a business from home. The factors which delineate a place of business which are normally considered, such as: • 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 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, are not relevant in your circumstances and have not been considered. Taking into account your circumstances, we consider that the space you use for your work is not a place of business. It follows you may not claim deductions for occupancy. While we acknowledge that your circumstances are exceptional the Commissioner has no discretion under the tax laws to make an exemption. However, you may claim a portion of running expenses in respect to this space. It follows you should apportion your running expenses for the space to exclude any hobby or private purpose. For further guidance, you may refer to Taxation Ruling TR 93/30.

Relevant facts: You are an employee of a business, and due to a medical condition you became fully incapacitated and could not fulfil your normal work duties. | You have medical reports stating the times you were waiting for an operation, and had post-operative incapacity. You were able to partially work in the office, in a city CBD for a period of time until you established your home office space. | You rent your place of residence, and you set up a home office there from where you worked solely from home for a period of time. | You consider that you have special circumstances due to working extremely hard from home, during an extremely difficult period.