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Re: Occupancy Expenses - COVID 19

Newbie

Views 1246

Replies 5

The ATO website (in a few different places) is currently advising the following: 

If you are working from home only due to COVID-19, you can't claim occupancy expenses such as mortgage interest, rent and rates

 

However, the following information may be gleaned from TR 93/30:

  • As a general rule, expenses associated with a taxpayer's home are of a private or domestic nature and do not qualify as deductions for taxation purposes. An exception to this general rule is where part of the home is used for income producing activities and 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.  [An] example is where part of the home is used as a taxpayer's sole base of operations for income producing activities (e.g., where no other work location is provided to an employee by an employer).
  • The following facts may indicate whether an area set aside has the character of 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;
  • The absence of an alternative place for conducting income producing activities has also influenced a court or tribunal to accept a part of a taxpayer's residence as a place of business. In [these cases] the taxpayer was able to show that, as a matter of fact, there was no alternative place of business, it was necessary to work from home, and that the room in question was used exclusively or almost exclusively for income producing purposes
  • In these circumstances, a place of business will only exist if it is a requirement inherent in the nature of the taxpayer's activities that the taxpayer needs a place of business, the taxpayer's circumstances are such that there is no alternative place of business and it was necessary to work from home; and the area of the home is used exclusively or almost exclusively for income producing purposes.
  • Exceptions to the above occur when a taxpayer maintains an ofice or study as a matter of convenience that retains it's private or domestic character (to carry out work at home that would otherwise be done at their regular place of employment).

 

So, in circumstances where an employee:

  • Has not volounteered to work from home instead of their place of employment, but rather, their place of employment was no longer open/operational and were required to work from home as their only option to retain employment (where no other work location is provided to an employee by an employer)
  • Has set aside a specific and designated area of the home to be occupied by equipment soley for work purposes that is not used for a domestic purpose (that the room in question was used exclusively ... for income producing purposes)
  • Has forfeited the ability to use that designated space for private/domestic purposes , as the space is soley occupied by equipment exclusively used for income producing purposes (no longer retains  it's private or domestic character)

why would such a blanket rule be applicable?

 

Has there been specific rulings, declarations or legislative amendments on this point?

 

Thank you in advance for your assistance.

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 0

Hi @ryan_m

 

@Iheartrefunds  makes some good points however I appreciate what you are seeking to clarify. I am going to suggest Early engagement here. Your circumstances detailed against the legislation will allow Early engagement to offer you the ATO's view and why that is.

 

Thanks

MarkATO

5 REPLIES 5

Former Community Support

Replies 2

Hi @ryan_m 

 

Thanks for contacting ATO Community.

 

If you're working from home, you may be able to claim a tax deduction for additional running expenses, including:

  • heating and cooling
  • electricity
  • mobile phone
  • depreciation of office equipment

Usually people calculate these expenses by claiming a fixed rate of 52 cents per hour or calculating each expense. With more people working from home due to COVID-19, we've temporarily introduced a shortcut method. From 1 March until 30 June 2020, you can claim a rate of 80 cents per work hour for all additional running expenses. 

 

This means that all you need to do is record the hours you worked from home and when you complete your tax return, you can multiply that number with $0.80 to calculate your deduction. 

 

Note that you can't claim a deduction for items provided by your employer or if you have been reimbursed for the expense.

To find out more, visit Employees working from home.

 

I hope this helps and you remain safe and well.

MariR

Newbie

Replies 1

Hi @MariR ,

I appreciate your response, but that doesn't answer my specific question about claiming occupancy expenses.

TR 93/30 indicates that claiming occupancy expenses is permitted in specific circumstances, which differ from casual WFH arrangements.

 

The ATO website states "If you are working from home only due to COVID-19, you can't claim occupancy expenses such as mortgage interest, rent and rates"

 

There is a clear disconnect here, as nothing in the criteria set out by TR 93/30, nor the cases it refers to, indicate that COVID causing these criteria to be satisfied is any reason that the resulting expense to the employee is not deductible.

May you please advise further?

Thank you in advance.

Most helpful response

ATO Community Support

Replies 0

Hi @ryan_m

 

@Iheartrefunds  makes some good points however I appreciate what you are seeking to clarify. I am going to suggest Early engagement here. Your circumstances detailed against the legislation will allow Early engagement to offer you the ATO's view and why that is.

 

Thanks

MarkATO

Devotee

Replies 0

I think COVID has brought about some situations that are new for all of us. Normally, occupancy expenses are not claimable for employees, usually it
is more meant for those carrying on a business at home. It would be rare for an employee to not have an alternate place of employment.
I will follow this thread as I’m curious what the ATO will reply.
Do remember with occupancy deductions come CGT implications too.

Newbie

Replies 0

I have looked at the legal cases on the matters and I must say that the ATO advice is in line with the cases they won or lost. If there was a choice whether to work from home or not, the taxpayer lost, regardless of what were the obstacles of not getting into office. For instance, a barrister working on the cases at home (he could work in the chambers), a person working in Melbourne but living in Sydney (choice of place to live). This was regardless of whether the employment engagement stimulated a work from home. However, the commissioner lost some cases where there was no real choice, for instance, a music reviewer who couldn't work from her office, a manager where there was no office, etc.

 

My gut feeling is that COVID situation does not leave taxpayer much choice where to work, but each matter of course is facts dependent (whether you need a private office or could work from your kitchen table), and you might seek a private ruling. I feel however the Commissioner would fight tooth and nail not to allow a precedent to be set due to a large amount of taxpayers who could clam.

 

My $0.02

Greg