Can claims be made for home office expenses when it’s located overseas?
A question was asked of the ATO recently, via its “ATO Community” webpage that centred on the eligibility of a taxpayer to make deduction claims for home office expenses. While it is a question that would not generally warrant extensive clarification, the fact that the home office in question was located offshore made the query somewhat unique.
The taxpayer’s question to the ATO was as follows: “I will work remotely overseas (in a non-English speaking country) for at least one year for my Australian employer under Australian employment law (I am an Australian citizen).
“My employer does not have an office in that country, so my home will be my principal place of work and I will have a dedicated work room,” the taxpayer wrote.
“Can I claim my overseas home office running expenses? My receipts/paperwork will be in a different language and obviously in a different currency. If so, how does the currency exchange work? Will I have to keep note of the currency exchange at the time of purchase/payment, and will I have to keep translations of all paperwork?”
The ATO answer
The “ATO-certified” reply (answers are tagged as such where they have been checked as being clear and technically correct) was as follows: “You are in a unique situation and you should be able to claim the home office expenditure that relates to that one room in direct proportion to expenditure for the residence where you will be residing.”
The ATO officer then suggests the taxpayer carefully reads a particular taxation ruling “as it is something that is not widely published and little known”. (Here’s a link to that ruling, TR 93/30.)
The ruling states, the officer says, that a taxpayer “may be able to claim occupancy expenses if your home office has ‘the character’ of a place of business even if you are an employee”.
Paragraph 4 of the ruling states: “Whether an area of the home has the character of a place of business is a question of fact which depends on the particular circumstances of each case. This is likely to be the case where a part of a residence is set aside exclusively for the carrying on of a business by a self employed person (eg a doctor’s surgery). Another example is where part of the home is used as a taxpayer’s sole base of operations for income producing activities (eg where no other work location is provided to an employee by an employer)” [ATO emphasis].
The taxpayer is also advised that the documentation must be in English “unless the expense was incurred outside Australia” (see this ATO web page, under the sub-head “Written evidence”).
As far as the issue of exchange rates is concerned, the officer directs the enquirer to this guidance, also on the ATO website.
The “ATO-certified” reply however ends with this advice: “The better way to approach this issue, so you get it all right the first time, is to apply to the ATO for a private ruling and you will get the opportunity to discuss with the ATO officer that will provide the response, and all this will make it much easier for you to understand how all of this works for you.”