Private ruling: Home office occupancy expenses
Date of advice: 11 August 2017
Published: November 2017
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. 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 provided a place of business, ie the workstation available to you at the head office 40km away from your place of residence. You worked from your home as an alternative for your convenience and practical purposes. Although it is appreciated that there are time constraints inherent in the type of work that you do, and having the home office space makes it possible for you to do some of your work from home, your home office is not regarded as a place of business for tax purposes, and the Commissioner has no discretion under the tax laws to make an exemption. Taking into account the factors mentioned above, in your case we consider that the space you use at home for your work is not a place of business. It follows you may not claim deductions for occupancy. However, you may claim a portion of running expenses in respect to this space. For further guidance, you may refer to Taxation Ruling TR 93/30.

Relevant facts: You were a national operation manager for a company. | You allocated one bedroom of your residence for a home office and it was used exclusively for work purposes. | Your main duty during your employment was to visit the stores in your state and report to the head office. | The room in your rented accommodation was your main work station and you would go to the office once or twice a week for reporting. | The workplace and computer station which was provided for you by your employer was approximately 40km away from your home. | You went directly to the customers and returned to your home 90% of the time. | It was impracticable for you to use the workplace office for the majority of your work, and the head office did not require you to attend the office on a regular basis. | You have based your work related rent expenses on the floor area of the home office space.