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The Real Test of Tax Deductibility: Why Factual Circumstances Matter in Home and Travel Expense Claims


Eligibility for home office expense deductions
Eligibility for home office expense deductions

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As the Australian Taxation Office (ATO) continues to tighten its scrutiny of work-related expense claims, tax agents and accounting professionals should take particular note of a recent and instructive decision by the Administrative Review Tribunal (ART): Hall v Commissioner of Taxation [2025] ARTA 600.


This case offers a detailed analysis of the deductibility of home office and car expenses incurred during the COVID-19 period, with reference to several precedents.


Case Overview

The taxpayer in this case resided in a two-bedroom apartment in Melbourne. Due to public health restrictions during the COVID-19 pandemic, his role with the Australian Broadcasting Corporation (ABC) was adjusted as follows:


  • 75% of his working time was spent at home, primarily in the afternoon

  • 25% of his time was spent at the ABC studio, mainly in the evening


The taxpayer used the second bedroom as a dedicated home office on a permanent basis and travelled to the studio when required to use specialised broadcasting equipment.


Key Findings by the ART

  • Home office expenses were deemed deductible:

    The Tribunal found that the taxpayer’s home-based work arrangement was a result of both government public health directives and employer policy. The use of the second bedroom as a workspace was not temporary but sustained for the entire income year. As such, the associated occupancy expenses were considered work-related and deductible.


  • Car expenses were also deductible:

    The Tribunal held that the taxpayer began his working day at home and then travelled to the studio to perform further work duties. This journey was classified as travel on work, rather than the conventional to work commute, and was therefore deductible as a work-related expense.


Tax Law Insights: Key Principles from the ART Decision

The case underscores that deductibility is not determined solely by contractual arrangements or taxpayer intentions, but rather by the factual circumstances under which the expenses were incurred:


  • Factual circumstances are paramount: Deductibility hinges on whether the taxpayer genuinely commenced work at home and whether this arrangement was ongoing and necessary.

  • Permanence and substantive use: A home office used consistently throughout the year—as opposed to occasionally or incidentally—may qualify for partial occupancy expense deduction.

  • Redefining the starting point of travel: If the workday begins at home and travel follows to complete work-related tasks, that travel is considered on work, and not merely a commute, making associated car expenses potentially deductible.


These principles highlight that what matters is not the label (e.g., “remote work” or “home office”), but whether there is a demonstrable, continuous, and substantive link between the expense and the performance of income-generating activities.


Practical Guidance for Taxpayers

This case reinforces the importance of factual circumstances in determining the deductibility of work-related expenses—particularly under exceptional conditions such as a pandemic.


To ensure compliant and valid deductions, taxpayers should consider the following best practices:


  • Retain evidence of home office usage: Include photographs, schedules, and layout plans to demonstrate the dedicated nature of the workspace.

  • Allocate shared expenses reasonably: For utilities, internet, or rent, apply a rational basis of apportionment based on area and usage duration.

  • Obtain employer confirmation: Where possible, request written confirmation from the employer showing that home working was required by company policy or health orders.

  • Keep detailed travel records: Document itineraries, rosters, and logbooks to substantiate the work-related nature of travel expenses.

  • Use appropriate deduction methods: Choose between the fixed rate method or actual cost method, depending on the availability and quality of supporting documentation.


If you would like to explore how to correctly claim work-related expenses or evaluate whether your home office and travel expenses during the COVID period qualify for deductions, our tax advisory team is here to help. We offer tailored, up-to-date guidance to ensure you remain compliant and tax efficient.

 

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