Flight grounded: No guarantee of tax deductions if employees work from home

Claiming tax deductions for work-related expenses probably seems like a no-brainer to many people. The logic is reasonable enough – you incur expenses at home in deriving the income you earn as an employee, so a tax deduction is no problemo. Right?! Not necessarily. Tax is rarely that simple.

There are various tests in the tax law that apply to claiming work-related tax deductions, which may range from meal and car expenses, to computers and telephone expenses. Just because you incur the expense doesn’t make it deductible.

A recent decision of the Administrative Appeals Tribunal is a case in point.

The AAT upheld the Tax Commissioner’s decision to deny various work-related expenses that a pilot claimed for the 2008 income tax year as it found he had not discharged the onus of proof that rests on him under tax law. The Tribunal also affirmed the 25% administrative penalty imposed.

The man was a senior pilot employed by Regional Express Holdings (REX). During the relevant period, he claimed various expenses including:

• meals and accommodation;
• private car travel expenses for travel between home and airport;
• home office occupancy expenses;
• computer and office equipment, and fax;
• depreciation on computer, TV set and video camera;
• home internet costs – for checking the weather before leaving home for the airport;
• Foxtel fees – for checking weather on the Foxtel Weather Channel;
• landline telephone costs;
• credit card fees, fees for cash advances and interest on credit cards.

The pilot claimed his work at REX required him to set aside 10% of the area of his house as a furnished home office and required him to have both a mobile and a landline telephone, fax machine, computer with internet access, a TV set, Foxtel subscription and aviation magazines. He claimed 10% of his mortgage payments as deductions, as well as electricity and telephone charges.

The pilot’s assessable income from his job in the year in question was approximately $106,000 and the work-related deductions he claimed totalled approximately $54,000 i.e. over half his salary and allowances.

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