The Australian Taxation Office (ATO) has successfully appealed a ruling that could have opened the door for employees across Australia to claim their home office rent expenses as income tax deductions.
The Federal Court on Friday handed down its decision over a long-running stoush between the tax office and an ABC Sports presenter, who argued home office rent expenses incurred through the COVID-19 pandemic ought to be tax deductible.
The presenter, Ned Hall, was required to work partially from home during 2021 as public health restrictions affected Melbourne workplaces.
Hall initially claimed almost $6,000 in rent expenses related to the second bedroom of the apartment he rented, which he used as a home office.
He also claimed income tax deductions for car travel between his home and the ABC’s Southbank offices.
The ATO initially denied those claims, and Hall brought his claims before the Administrative Appeals Tribunal (AAT), which last year set aside the ATO’s objection and allowed the tax deductions.
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The tax office appealed that decision before the Federal Court, which has now sided with the ATO and upheld its original call to reject both the WFH and car travel deductions.
The AAT “did not conclude, and it could not have concluded, that the second bedroom was the respondent’s business premises,” according to the ruling.
Overall, the Federal Court found Hall “used the second bedroom for his work, but work use (although relevant and important) does not necessarily transform domestic expenditure into something else”.
Put more bluntly, it found the “essential character of the expenditure was rent paid to secure domestic accommodation,” not spending to secure Hall’s sole place of work.
The Federal Court also dismissed the idea Hall could deduct his travel expenses, finding his “commute to the Southbank Studios was travel “to” perform income producing activities, not travel “in” performing income producing activities,” and therefore not deductible.
Its decision makes clear that employees face different rules compared to the self-employed when claiming income tax deductions related to home workplace and travel expenses.
In a statement obtained by the Herald Sun, an ATO spokesperson said the decision “confirms the longstanding principles associated with the deductibility of expenses related to working from home and travel to and from work”.
However, legal experts cited by The Age state the case could still rise to the High Court for another appeal, in proceedings that could, once again, challenge traditional notions of tax deductibility.
- This article first appeared on SmartCompany. You can read the original here.
