Legislation And Commentary

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Introduction:...............................................................................................................................2
Discussion about the ruling:.......................................................................................................2
Date of effect:.............................................................................................................................3
Explanation of Ruling:...............................................................................................................3
Deduction for “Decline in Value” of depreciating asset:..........................................................4
Repairs to home office:..............................................................................................................4
Capital gains implications:.........................................................................................................5
Conclusion:................................................................................................................................5
References:.................................................................................................................................6

2TAXATION LAW
Introduction:
The “taxation ruling of TR 93/30” is concerned regarding the deduction that is
allowable for home office outgoings. In detail, the “taxation ruling of TR 93/30” provides
explanation when an area in the house is viewed as private study. It explains when the area of
the house is viewed as the place of business (Woellner et al. 2016). The ruling is concerned
with providing explanation when the when a taxpayer is permitted to get deduction in each of
the case within the “sec 8-1 ITAA 1997” and the manner in which it should be computed. The
ruling further provides clarification regarding the deduction of repairs under the “sec 25-10
of the ITAA 1997”. The ruling is also dealing with the consequences of CGT following the
sale of main residence relating to which home office expenditure has taken place.
Discussion about the ruling:
The general rule explains that outgoings associated to home of a taxpayer is viewed as
private or domestic in type and no tax deduction is allowed. An exception is that a deduction
is permitted when the portion of home is utilized for generating income and holds the nature
of “place of business”. In such a situation, certain outgoings occurred for home such as
interest, rent, repairs, house and content insurance, rates and taxes on property is partially
permitted for deduction (Sadiq 2019). There are certain factors which might indicate whether
or not the area is set aside carries the character of place of business.
a. The area can be recognized has “place of business”
b. The area cannot be considered readily suitable or adaptable for private usage or
domestic usage purpose in relation to home.
c. The area is mainly set aside for conducting business activities
d. The area is mainly used visiting purpose of clients

3TAXATION LAW
The outgoings that are allowed for deduction relating to “home office” is divided in
two categories.
a. Expenses associated to the house ownership that are not affected by the income
producing activities of the taxpayer such as occupancy expenses (Ato.gov.au 2020).
This comprises of rent, interest, water rates, land taxes and municipal.
b. Outgoings associated to facilities usage in house such as running expenditure. This
involves the electricity, lightning, cooling, cleaning costs, depreciation and finishing
of office.
Date of effect:
The ruling is mainly applicable to the years starting both prior to and following the
issue date. Nevertheless, the ruling is not applicable on taxpayers up to the extent that it is
conflicting with the settlement terms relating to a dispute that is agreed prior to this date of
issuing the ruling.
Explanation of Ruling:
As held in “Thomas v FCT (1972)”, outgoings associated to the house ownership
usually have the characteristics of private or domestic and no tax deduction is given to
taxpayer under the “sec 8-1 ITAA 1997”. Nevertheless in some situation, a portion of these
outgoing might be permitted for deduction (Barkoczy 2016). The permissible tax deduction is
reliant on whether the area in the house carries the character of business or it is simply
considered as private study.
In the determining cases relating to home office expenses, courts and tribunals have
constantly drawn differences among the cases;
a. Where the portion of home can be treated as having the place of business

4TAXATION LAW
b. Where the room is used by the taxpayer for study or home office is simply considered
as the matter of convenience.
In “Swinford v FCT (1984)” the law considered that differentiation is vital given the
area of home carries the character of business then the outgoing relating to that portion of
house can be considered as having business character and are permitted for deduction.
Deduction for “Decline in Value” of depreciating asset:
Taxpayers is given permission to get deduction for fall in value of “depreciating
asset” that are used or it is installed as ready for use for producing income. When
“depreciating asset” is used for home office, the taxable purpose implies generating income.
“Depreciating asset” associated to “home office” might involve the professional library and
certain equipment items which is used at home (Morgan, Mortimer and Pinto 2018). Where
the items is used for business purpose and also used for domestic or private purpose, the
taxpayer will be required to lower the deduction for depreciating asset, decline in value is
allowed till the portion of asset used for taxable purpose.
Repairs to home office:
Under “sec 25-10” a deduction is permitted for non-capital outgoings on repairs to
premises or the portion of premises that is held or used by taxpayer for generating chargeable
income. For a home or a portion of it to be viewed as being “held for generating income” it
should be having the place of business (Robin and Barkoczy 2019). No tax deduction is
permitted within “sec 25-10” for repairs in relation to home where income generating
activities is related to private study. If a part of home is considered as place of business then a
cost associated to repair for a portion of home is permissible for deduction within sec 25-10.

5TAXATION LAW
Capital gains implications:
Under “sec 118-190” CGT is applicable on main residence sale if it was also used for
producing taxable earnings all through the period of ownership. When a part of home is set
aside and used as business for generating income the provision for capital gains is applicable.
When a CGT event takes place to home which was used during any point of time for
generating taxable earnings, the capital gains or capital loss is increased by the sum which is
considered reasonable in accordance to the extent up to which interest on borrowing occurred
while purchasing the house have been considered deductible under “subsec 118-190 (2)”.
Conclusion:
Conclusively, the ruling provides an understanding that a deduction is allowed to
taxpayer under the “sec 8-1 ITAA 1997” for using their part of home for “home office”
purpose. The taxpayers are permitted to obtain deduction for not only for the “running and
occupancy expenses” but they are also permitted to get deduction for repairs and decline in
value of asset.

6TAXATION LAW
References:
Ato.gov.au. 2020. Legal Database. [online] Available at:
<https://www.ato.gov.au/law/view/document?Docid=TXR/TR9330/NAT/ATO/00001>
[Accessed 8 April 2020].
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Morgan, A., Mortimer, C. and Pinto, D., 2018. A practical introduction to Australian
taxation law 2018. Oxford University Press.
Robin and Barkoczy Woellner (Stephen & Murphy, Shirley Et Al.), 2019. Australian
Taxation Law Select 2019: Legislation And Commentary. Oxford University Press.
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.