Know More About Home Office Expenses
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A lot of people incorrectly assume that because they frequently work from home that they are therefore entitled to a deduction of a portion of their interest, rent, electricity, etc. The ATO has provided a ruling TR93/30 which gives their view on when home expenses are deductible and how much of those expenses can be claimed.
The ATO has held the view that a home office area must have the character of a place of business before occupancy costs are deductible. The ruling indicates that the following has the character of a business : the area is clearly identifiable as a business the area is not readily suitable or adaptable for use for private or domestic purposes 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
Where you have a fixed place of business that you go to every day (e.g. school teacher, lawyer for a large law firm, radio show host) and you have an room in your house or apartment that you use for study and work purposes it will generally be considered to be of a private and domestic nature and a portion of the occupancy costs will not be deductible. We have seen cases where clients have claimed a percentage of their rent in such cases and during audit the claim has been disallowed.
One of the major cases is Handley v FC of T where a barrister claimed a proportion of his interest, rates, taxes and fire insurance premiums attributable to the study. He used his home study for approximately 20 hours per week for about 45 weeks of the year. The courts said that the expenditure was not an allowable deduction because the essential character of that expenditure was domestic.
Mason J said
"Here the study is a room in the taxpayer's home, not seperate from it in any way, having no distinctive physical characteristics, readily capable of other use for family purposes, and in fact used for non-professional purposes from time to time. Moreover when used for professional work it is ordinarily used only for professional work that can be done at home, in the evenings and on weekends e.g. working on briefs and preparing opinions. Expenditure related to the study is therefore referrable to the home. The essential character of the expenditure.is therefore of a capital, private or domestic nature"
There are cases where your home occupancy costs will be deductible and why the facts of your particular situation need to be reviewed to ensure that you are making a correct claim. Give Omega Partners Sydney CBD Accountants a call to discuss your home office expenses. People with rental properties frequently incorrectly claim their home office expenses and this is usually only detected at audit or when changing accountants. Unfortunately by then penalties and interest can have accumulated. loan acquisition fees guarantee fees valuation fees search, survey and registration fees mortgage lender insurance broker's commissions some legal costs.
Article Source: Articlelogy.com
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