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Tax & Working from home

Discussion in 'Accounting, Tax & Legal' started by Insight, 30th Dec, 2006.

  1. Insight

    Insight Brisbane Buyers Agent

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    Just curious if there is any possibility to deduct part of a rental payment on a residential lease if you are also working from home? I imagine not but just thought I would ask before signing a 12 month lease :)
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yes, it can be done - but only if you have a dedicated workspace (eg office, study or separate bedroom dedicated to your work area). You can then apportion part of the rent and services (electricity etc) as valid work expenses.

    The apportionment is based on the floorspace of your work area as a percentage of the whole house - work out the area of the house in square metres and also work out the area of the work space. Divide the work space area into the total house area, multiplied by 100 gives you the percentage you can assign to home office expenses.

    If you just work from the kitchen table, or from a desk in the lounge or living area, then you won't get away with claiming it if challenged by the ATO ... it must be a separate dedicated work space.

    You could, in theory, also claim part of the interest on your house loan if it was a PPOR, but then you potentially run into other tax problems down the track, as this might be subtracted from your cost base or may potentially lead to disputes about the tax-free capital gains ... definitely get good advice about this first.

    You also need to justify that you are legitimately working from home, and not just occasionally doing some extra work. A letter from your employer stating how many hours per week you work from home is a good way to do this. If you are self-employed it may be somewhat easier to justify, depending on the nature of your work.

    Hope this helps - I've been doing this for a while.
     
  3. Insight

    Insight Brisbane Buyers Agent

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    Useful reply Sim, thanks.

    How much % of rental are you claiming at the moment? I have just put down 25% of the short term rental I'm living in presently.

    Perhaps for the rented appartment it would be appropriate just to claim the 2nd bedroom?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I was claiming about 18% of my rented unit, which was the 2nd bedroom. I haven't done my first tax return since being in our rented house, so I'm not sure how much it will be ... possibly a bit less - the office is much larger, but the house is too !

    I need to double check everything with my accountant.
     
  5. Insight

    Insight Brisbane Buyers Agent

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    Well I will put down 25% of the rented abode and look at the plans for the future rental property.

    Have invested a few weeks into researching property only to find out that I'm better off waiting to buy a PPOR... Back on the rental train for another year unfortunately.

    Probably I have read the good reason why interest on PPOR's isn't -ve geared before, but I forget.