Private ruling: Rental deductions for Company place of business
Published: November 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can you claim a percentage of the rental cost of the residence where you reside and from where your company conducts its business activity? | A1: 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 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 or a provision of tax legislation excludes it. Taxation Ruling TR 93/30 sets out the Commissioner's views concerning the deductibility of home office expenses. The deductibility of particular expenses depends upon whether the home can be characterised as a 'place of business'. Where a home is a 'place of business', a taxpayer may be able to claim some or all of the 'occupancy' and 'running' expenses. You have provided evidence to show that a business is conducted on the premises by the company and the extent of the area that the company uses. The real estate agent was unwilling to enter into a lease agreement with the company. Therefore you entered into the agreement and paid the rent. If the rent were paid by the company it would be deductible as an expense incurred in carrying on its business. Rather than the company reimbursing you for their share of the rent, they have paid you additional wages to cover this amount. Therefore a deduction will be allowed for the rent payment to the extent that you have shown that the company uses the premises for business purposes.

Relevant facts: You and your spouse are the only directors and employees of the company. | The lessor refused to rent the residence to your company. | The rental lease agreement is in your name as an individual. You are the company secretary, director employee and shareholder. | The directors decided that you would be paid additional salary by the company to cover the rental portion for the company's use of the premises for business purposes. | The company completes work for major contractors. The company does not have to advertise for additional work, as current work schedules are ongoing and the company is working to current capacity. The business premise is registered as the place of business with your clients who visit to review production schedules and progress reports on scheduled work, at the office at the front of the premise. | A survey of the property taken based on usage of the total premises space shows that a percentage of the space is business usage. | The yard is lawn and concrete flooring. Housed in the grounds are the following company assets: work vehicles; work equipment; heavy duty trailers; ramps; temporary fencing; a storage area and a finishing area for in house product production. | Each work day sub-contractors meet at the residence, load materials used for the days work and proceed to the current worksite. | You state that because of the business, the premise is not suitable as a residence and you are planning to lease a residence to be a home and not business related in the future. The areas vacated at this time will be converted to additional storage and work areas.