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Paying “board” is a private arrangement says the ATO and cannot be used to claim the revised 67c fixed work-from-home rate.
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Offspring living with parents miss out on 67c WFH rate
11 November 2022
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Almost 1.5 million employed offspring living in the family home stand to lose out under the ATO’s revised WFH guidance, say tax professionals.
The revised fixed rate of 67c an hour, set out in PCG 2022/D4 released last week, specifies tighter record-keeping requirements than the previous 80c shortcut method and specifically rules out claims that rely on “paying board” to parents by offspring living in the family home.
IPA general manager of technical policy Tony Greco said an adult still living with their parents and working from home would be adding to the running costs of the home, such as electricity, but would be unable to claim.
He said the ATO’s view was set out in example 6 in the compliance guide:
Example 6 – not incurring additional running expenses
- Sergei is employed as a graphic design artist. He works in the office three days a week and works from home two day per week. Sergei lives with his parents and when he works from home, he works in his bedroom using his employer-provided laptop and mobile phone. Sergei does not pay his parents any rent and he does not contribute to any of the household bills.
- Although Sergei is carrying out his employment duties while working from home, he is not incurring additional running expenses. Accordingly, Sergei is not entitled to a deduction for additional running expenses and he cannot rely on this guideline.
Director of tax communications at H&R Block Mark Chapman it had always been a feature that “additional costs” needed to be incurred in working from home so the basic rule set out in the PCG was not unusual and the result in the example was “fair enough”.
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“Sergei works from his parents’ house and pays nothing towards the running costs of the house. So, why should he be able to claim a tax deduction? The parents do incur costs, but they aren’t the ones working from home — so they don’t have taxable income against which a deduction can be claimed. It’s unfortunate, but it’s also a fair application of the law,” he said.
But he criticised paragraph 51, which rules out claims that centre around paying board.
“In some situations the taxpayer may actually be paying something to the parents (board),” he said. “But the ATO dismisses it as a private arrangement, insufficient to make the WFH expenses deductible. This is harsh.”
Mr Greco said the ruling reflected reality in many cases.
“If you’re just paying board for the actual accommodation then it's too indirect, because you'd be paying that anyway, whether you worked or you didn't,” he said.
He said someone living with their parents, working from home “and chewing through extra running costs” would have to show that they were “contributing to those additional costs associated with working from home”.
Tax partner at HLB Mann Judd Peter Bembrick supported the ATO’s position and said those seeking a way around it might struggle to keep suitable records.
“The contrary view would require the board to be characterised as partially for occupancy of the house (and perhaps also meals) and partially as a contribution of running costs, which may be possible, but it would be necessary to somehow substantiate how the board has been calculated with this in mind,” he said.
“I expect in most cases the board is just set as a single number and is fairly arbitrary in nature (and may not represent even a full arm’s length rental value for occupying the room, let alone payment of other costs).”
The head of data at Benchmarking Group Julia Thomson said one in four Australians aged 15–44 lived in the family home, or 2.5 million people.
“Of the 2.5 million Australians (offspring aged 15–44) living in their family home, 58 per cent are currently employed,” she said, referring to the latest ABS Census data.
That added up to 1.45 million workers, equivalent to 21 per cent of all workers in the 15–44 age bracket and an increase of 25 per cent compared with 2006 data.
Mr Greco said some parents might welcome the chance to bring household costs to the attention of their working children.
“The PCG has a silver lining for parents courtesy of the ATO and the tax system,” he said. “Parents will find this comforting and a way to reapproach the subject of encouraging co-contribution to shared household running costs.”
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