The Age of the Home Worker – Part 1: Deductibility of Home Occupancy Expenses

Abstract

The number of workers including employees that make use of their home to work has increased considerably in recent years. The authoritative court cases on the deductibility of home office occupancy expenses, the main ones being rent of premises and interest on home loans, were decided in a past era of work practices that differed from current work practices, including the rise of the mere contemplative (knowledge) worker. Given the extent of taxpayers with outstanding home loans (35% of Australian dwellings) and the extent of renters of homes (31% of dwellings), the deductibility issue is significant. The presence of the capital gains tax main residence exemption, and its partial withdrawal where home office occupancy expenses are deductible, adds to the significance of the issue. This article, the first of two related articles, sets out the extent of the working at home phenomenon and then identifies relevant home occupancy expenses and distinguishes them from home running expenses. The article then examines the authorities with the aim of discerning the key principles that will govern the deductibility question for workers’ home occupancy expenses, including in the situation of the mere contemplative (knowledge) worker.