tax question

From: Andrew Smith


I've been told by a friend that since my company has provided me with furniture and equipment to set up a home office and work from home, I could claim 25% of rent back in my tax return (if I was renting). However, I'm not renting but living in my PPOR and paying off my mortgage. Am I able to claim 25% of my mortgage repayments back?

Thanks to anyone who can help.


PS I have a P&I home loan (just in case this is relevant)
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Reply: 1
From: Paul Zagoridis

Hi Andrew

This is an area for specific advice and no doubt Dale will give general comments.

Basically you can claim part of your home as a home office even if your company does not furnish it. Therefore some part of your house is potentially deductible.

However I believe it affects some of the CGT exemption of your PPOR. I may be wrong on that.

WealthEsteem :: Psychology of the Deal
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Reply: 2
From: David Siacci

I have a home office and my accountant told me to claim a portion of my costs against my property but not the mortgage. The reason is the portion you claim would then be used for capital gains tax when you sold , so you have to weigh it up carefully.
I claim 20% of my rates, insurance etc, have been audited and no come backs from ATO.
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Reply: 2.1
From: Richard Hunt

Hi Andrew,

The extent to which you will be able to claim a tax deduction on various home office expenses will depend on whether your home office is merely a place where you bring home work for personal convenience ("akin to a home study"), or whether it is in fact a "place of business", which in the context of an employee may be taken to include an area or room where you conduct a substantial portion of your employment duties.

If a "home study", you cannot claim expenses such as the interest on your mortgage, rates or building insurance, although you may be able to claim among other things, heating/cooling/lighting expenses.

If a "place of business" then in addition to the expenses that may be claimed for a home study, you may also claim a portion of the interest on your mortgage, rates and insurance. Generally, the portion will be referable to floor area of the room from which the employment duties are conducted.

From your comments it appears that your employer may be pursuing a decentralised employment place policy in which case there is a strong argument to suggest that your office will be a "place of business".

Where the office is a "place of business" your PPOR CGT exemption will be diluted. Expect to derive a capital gain calculated by reference to the relative floor area of the office and the period over which the office was used as a place of business.

Just because you may "choose" not to claim a tax deduction for mortgage interest etc.where your office is a "place of business", this will not necessarily protect you from deriving a capital gain on your PPOR.

There is a lot of grey area between the black and white on these sorts of issues, I suggest you have a chat to your accountant. Better still, see if you can get your employer to pay for some expert advice.

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