Private ruling: Work related expenses
Date of advice: 23 March 2016
Published: May 2016
Ruling period: For the year ended 30 June 2015. | For the year ended 30 June 2016. | For the year ended 30 June 2017. | For the year ended 30 June 2018. | For the year ended 30 June 2019.
Date scheme commenced: 1 July 2014.

Ruling: Q1: Are you entitled to claim part of your rental expense as a deduction for your home office? | A1: Yes.

Relevant facts and circumstances: You are a property consultant. You initially worked for an organisation on a contract basis but will now work for the same organisation as an employee. As a contractor you worked from home full time and used your home office. You claimed all your home office expenses based on 20% floor space including rent. You will perform the same duties and hours when you become an employee. There is no room for you to work from the organisation's business premises due to a lack of space. About 20% of your clients visit your home office. You also visit clients either at their homes or interstate in hotels. The office is a separate room. It is the first room as you walk in from the front door or the garage. It is not a bedroom. It is known as a media room but you use it as an office because of its generous size. The office has a professional desk and book shelving, filing cabinets, white board, computers, printer etc, it is used solely as your office and nothing else.

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, or a provision prevents you from deducting it. Generally, expenses associated with a taxpayer's home are private or domestic in nature and therefore do not qualify as allowable deductions for taxation purposes. For a deduction to be allowable for home occupancy expenses, the expenses must satisfy the requirements of section 8-1 of the ITAA 1997. Home constitutes 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. Taxation Ruling TR 93/30 outlines the following factors that the Commissioner believes indicate whether or not a home office has the character of a 'place of business': • 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 income producing purposes, and • the area is used regularly for visits of clients or customers. The existence of any of these factors or a combination of them will not necessarily be conclusive in determining whether the home constitutes a place of business in the ordinary and common sense meaning of the term. The determination will depend on a balanced consideration of the essential character of the area, the nature of the taxpayer's business and any other relevant factors. On a balanced consideration of the facts surrounding your circumstances, we consider that your home office does constitute a place of business. Therefore, you are entitled to claim a portion of the rent expense you incur.