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Careful when working from home, there are tax risks

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It’s great you enjoy your job. Working from home brings new challenges.

Careful when working from home, there are tax risks

This article is a little different to the usual workplace advice type articles. However on a another level it continues our series of wanting to inform you. Take care of you, in regards to anything to do with the workplace. Experience now tell us working from home has led to a new era of dismissals, workplace investigations and adverse action. We are in unprecedented times. Please read on, “Careful when working from home”, there are tax risks

Working from home

Many employees are now working from home, great. “I don’t have to travel to work”, and “my house is now a tax deduction”, “how good is that”. I thought for a different workplace theme. Get away from vaccinations, unfair dismissals, Fair work Commission matters, we would look at the issue. Careful working from home is not just about worrying about getting the sack. Now A Whole New Approach are not tax accountants or lawyers, but leading workplace advisors. Get licensed tax accountants advice if you have concerns, or give us a call, I don’t mind.

Claiming Tax Deductions on Occupancy Expenses

“Careful when working from home”, is worth reading, anything that improves your tax knowledge is worth the read. In order to claim working from home expenses in the first place, you must be working from home to fulfil your employment duties and not just be carrying out occasional or trivial tasks. (i.e. checking emails or taking phone calls). You must be incurring additional expenses as a result of working from home.[1] However, occupancy expenses are generally not deductible from your assessable income.[2]

The ATO has held that as rent payments are a form of occupancy costs. They are considered expenses of a ‘private or domestic nature”, meaning they are generally not deductible even where part of the rented home is being used as a home office. The Income Tax Assessment Act 1997 (Cth). States that expenses are deductible from assessable income if they are “incurred in gaining or producing your assessable income” or if they are necessary for carrying on a business for that purpose.[3]

Private and domestic nature

However, one of the exceptions to this is that expenses of a “private or a domestic nature” cannot be deducted. Such as occupancy expenses (i.e. rent, mortgage, interest) and running expenses (i.e. electricity, furniture). Nevertheless, rent deductions may be claimed if that part of the home is being used exclusively for the purposes of income-producing activities. That there is no alternative place of business available.

Careful-when-working-from-home-there-are-tax-risks
Working from home as a feel of working for yourself, have you got the discipline for it long term

Place of Business

In Taxation Ruling TR 93/30, the Commissioner of Taxation held that deductions on occupancy and running expenses may be made where the home office has the character of a “place of business”, rather than being merely a “private study”.

“where part of the home is used for income producing activities and has the character of a ‘place of business’… Some of the expenses incurred in respect of the home such as rent, interest, repairs, house and contents insurance, rates and property taxes, may be partly deductible”.[4]

Therefore, a distinction is drawn between an area of the home that can be identified as a place of business. As compared to a room that is used as a study or a home office for a matter of mere convenience. In cases where the area is classified as a place of business, tax deductions are allowable because the space loses its domestic character and takes on a business or businesslike character.[5]

Whether an area of the home is a place of business will depend on the circumstances, but the following factors point towards such a finding:

  • The area is separate and distinct from the rest of your home and it is clearly identifiable as a place of business;
  • The area cannot readily be used for private or domestic purposes that coincide with the use of the rest of the home more generally;
  • Area is used exclusively or almost exclusively for carrying on a business;
  • The area is used regularly for visits of clients or customers.[6]

Taxation issues

On the other hand, a private study is an area (i.e. office or study at home) that you only use as a matter of convenience, so that you can complete work from home, which could otherwise have been done at your place of business or employment. Examples of situations where an area was held to be a private study, rather than a place of business, include:

  • A barrister’s home office where they read client briefs.
  • A teacher’s desk at home where they prepare lesson plans or mark assignments.
  • An insurance agent’s home office where they store their client files and occasionally interview they clients.[7]

In these examples, the areas in question retained their private or domestic character and were not held to be a place of business.

However, the requirement that is space must be separate and distinct and cannot readily be used for private and domestic purposes. This may disqualify a vast majority of people who are working from home because they are working from the sofa, the lounge room or the dining table.[8]

Alternative Workplace

Another relevant consideration is whether there are any alternative workplaces for conducting income-producing activities. If there is no alternative place of business. It is necessary to work from home. The area used is only for income producing purposes, then the court or tribunal is more likely to find that the relevant area is a place of business for the purposes of tax deductions.[9]

During the lockdowns and enforcement of restrictions, it can be said that the office remains inaccessible as employees are directed to work from home where possible. As a result, many employers have closed their offices and instructed their employees to continue operations from home. Therefore, there is no alternative place of business available and it is necessary to work from home.

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Careful when working from home, there are tax risks, any concerns?. Get tax advice

What expenses can I claim?

The Australian Taxation Office (ATO) has published guidelines online regarding. ‘Working from home during COVID-19’ which explain the deductions that can be claimed and the processes for doing so.[10] The deductions listed on their site refer largely to running expenses, including:

  • Electricity expenses, such as heating, cooling and lighting for the area you are working in and the items you are using to work.
  • Cleaning costs incurred for the dedicated working area.
  • Phone and internet expenses.
  • Computer consumables (i.e. paper, ink) and stationery.
  • Home office equipment, such as computers, phones, furniture.

Some restrictions do apply to these deductions, but they can be claimed by almost everyone who is working from home, even if your home office classifies merely as a “private study”.

On the other hand, if your home office can be classified as a “place of business”, then it may be possible to claim deductions in rent, mortgage or interest.[11] If occupancy expenses are deductible, then the actual amount which can be claimed may depend on the apportionment of total expenses occurred, according to floor area and time (i.e. the period of the year in which the room was being used to produce income).[12]

But what about Capital Gains Tax?

Capital Gains Tax (CGT) is the tax paid on profits from selling assets, such as property.[13] If you sell your house and make a profit on this sale. Meaning you selling it at a price higher than what you purchased it for, this additional profit will be your capital gain. However, if your property falls within the recognised categories, then a tax will be applied to that capital gain, which you must pay to the ATO.

In general, your main residence (i.e. your home) is exempt from CGT. But it may apply if you use your home for business.[14] This means that if your home office is considered a “place of business” and you subsequently claim tax deductions for occupancy expenses. Then at the point in time when you sell your home, the CGT will be applied to this sale because a portion of the home was used for business and income-producing purposes.

Place of business

An important caveat to note is that if your home office satisfies the conditions of being a “place of business”. Even if you do not claim home occupancy expenses in your income tax return the CGT will still apply when you sell your home. The ‘interest deductibility test’ is as follows:

“If you use part of your home for rent or business, you would be allowed a tax deduction for part of any home loan interest. Your home is subject to CGT to the same extent.”[15]

This means that the extent to which you are eligible to claim tax deductions because your home is a “place of business”, is the extent to which the CGT will apply when you sell your home. As previously mentioned, even if you do not actually claim the deduction, the CGT will apply if the interest deductibility test is satisfied.

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You don’t want the tax office after you. Get accountants advice, if its more related to your workplace give us a call

Careful when working from home, there are tax risks, So what should I do?

Ultimately, the choice is yours. There is a high threshold to be met for your home office to quality as being a “place of business”. In order for you to be able to claim tax deductions for occupancy expenses. However, if it is classified as such, then you will also be partially liable for paying the CGT upon the disposal of your property.

The benefit of claiming occupancy expenses is that you will receive a greater portion of your assessable income back from tax returns. However this amount will later be offset by the application of the CGT, which is applied at the same rate as your income tax (for individuals).

Regardless of whether you claim occupancy expenses or not, as an employee working from home, you are able to claim running expenses for the time you are completing income-producing work. Please see the Australian Taxation Office website for further details and instructions.

Having been in business for 40 odd years, my view is get your reductions properly, or leave it completely alone. Having the attitude of go “I’ll claim half away”. “I’m not sure what I’m doing, I’ll claim. I little bit, but I don’t want to upset the tax office”, this approach ends in tears. Be careful, particularly at the moment the tax office knows allot of employees working from home. Employees will give it a go. Try it on. The ATO is not your friend, lets be honest, rich people don’t pay tax in this country. Its employees working from home, sort of “low hanging fruit”, that’s easy pickings for the tax office.

Careful-claiming-expenses
Are you better off working from the office or home is a question many employees are currently addressing. The tax office recently announced the amount of deductions employees are claiming working from home has increased by billions, its a no brainer that the tax office will examine home based expenses carefully. Working from home has made some of lazy, comfortable, you really have to consider the issue from a clear business point of view.

Summary: Careful when working from home

I hope this article “Careful when working from home, there are tax risks” has been informative for you “. If you have other issues around. this, or working from home in general, or returning to work. If you get dismissed or threatened with dismissal because you don’t want to work from home anymore, its not worth it, or risks are too high. Give us a call. Fair work Australia and Fair work Commission matters, unfair dismissals, general protections, workplace investigations give us a call. Advice is free and confidential. 1800 333 666.

Happy to discuss any workplace issue, including termination of employment. Diversity in the workplace, constructive dismissal, been sacked, workers rights whatever. AWNA are leaders in workplace commentary, our name is on over a 100 published decisions, 200 articles on the internet. We are not afraid of taking on the hard issues. We only represent employees.

Another article on bullying when working from home that may be helpful to you, click here

Article on being flexible working from home, click here

Is working from home really worth it, click here

Does your private life matter, click here

Citations


[1] ‘Working from Home’, Australian Taxation Office (Web Page, 1 July 2021) < https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/home-office-expenses/>

[2] Ibid.

[3] Income Tax Assessment Act 1997 (Cth) s 8.1.

[4] Taxation Ruling TR 93/30, [2] (‘Taxation 1’).

[5] Swinford v FC of T (1984) 15 ATR 1154.

[6] Taxation 1 [5].

[7] Handley v FC of T (1981) 11 ATR 644; Forsyth v FC of T (1981) 11 ATR 657).

[8] ‘Be careful what you claim for when working from home. There are capital gains tax risks.’ The Conversation (Web Page, 30 June 2020) <https://theconversation.com/be-careful-what-you-claim-for-when-working-from-home-there-are-capital-gains-tax-risks-141364>.

[9] Taxation 1 [12].

[10] ‘Working from Home during COVID-19’, Australian Taxation Office (Web Page, 17 December 2020) < https://www.ato.gov.au/general/covid-19/support-for-individuals-and-employees/employees-working-from-home/>.

[11] Ibid.

[12] Taxation 1 [18].

[13] ‘Capital gains tax’, Australian Taxation Office (Web Page, 4 August 2021) <https://www.ato.gov.au/Individuals/Capital-gains-tax/>.

[14] ‘List of CGT assets and exemptions’, Australian Taxation Office (Web Page, 4 August 2021) https://www.ato.gov.au/Individuals/Capital-gains-tax/List-of-cgt-assets-and-exemptions/#Yourmainresidenceyourhome.

[15] ‘Using your home for rental or business’, Australian Taxation Office (Web Page, 4 August 2021) <https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence-(home)/Using-your-home-for-rental-or-business/>.

Employee Threatens to Stab Supervisor – Wins

Employee-Threatens-to-Stab-Supervisor

Employee Threatens to Stab Supervisor – Wins,

What’s going on here? Aggressive behaviour, will constitute threats of physical violence or actual physical assault. May be considered serious misconduct and grounds for instant summary dismissal. Despite employers adopting a zero-tolerance to violence and aggression in the workplace. A New South Wales employee was found to be unfairly dismissed after a myriad of violent behaviour, including threatening to stab her supervisor.

Fair Work Regulation 1.07

Fair Work Regulation 1.07 defines serious misconduct as conduct that is willful or deliberate and that is inconsistent with the continuation of the employment contract. This conduct may also be conduct that causes a serious and imminent risk to the health and safety of a person or to the reputation, viability or profitability of the employer’s business.

Examples of serious misconduct include theft, fraud, assault, intoxication at work and the refusal to carry out lawful and reasonable instructions. Given this definition, an employer can reasonably assume that a threat to stab a co-worker, falls under conduct that causes a serious and imminent risk to the health and safety of a person and warrants summary dismissal.

Aggressive Behaviour and Serious Misconduct

In unfair dismissal case of Michelle Rawson v Mudgee Golf Club Ltd,. The employer summarily dismissed an employee, Ms Michelle Rawson, for serious misconduct after she threatened to stab her supervisor. Further behaved disrespectfully towards fellow employees and attempted to delete the employer’s Facebook page. The Fair Work Commission in NSW determined that there was a valid reason to dismiss the employee for serious misconduct. However due to the flawed workplace investigation, the dismissal was held to be unfair.

Unfair dismissal case details

On 16 January 2020, a supervisor of the employer, Mr Rhys George, raised allegations against Ms Rawson that upon engaging in a conversation with her about food orders earlier that day. She became angry and threatened to stab him. Mr George and Ms Rawson had a strained and tense relationship. So a meeting was arranged between all parties on the following day.

The discussions during this meeting were disputed by both employer and employee but the most significant aspect of contested evidence was whether, after initially denying that she had threatened to stab Mr George. Ms Rawson admitted to making such a threat, but that she downplayed the comments by stating that she had frequently used remarks of this nature. Nevertheless, no formalized disciplinary action was taken or documented by the employer after this meeting.

On 19 January 2020, a staff member had complained that Ms Rawson had treated her in a very disrespectful manner and had humiliated her. The employer made a written record of the detail of events. On the afternoon of 20 January 2020, Ms Rawson received an email that confirmed the earlier verbal advice of her suspension from duty and set out three allegations of misconduct. The allegations of misconduct related to inter alia, the stab threat incident of 16 January and the incident of 19 January.

Suspension from employment

The suspension from the employment letter also advised that Ms Rawson was required to attend a meeting at 10 am on Friday, 24 January. At which time she would be provided with an opportunity to respond to the allegations of misconduct.

Ms Rawson responded to this email. She denied the allegations in their entirety and submitting that she had been unfairly suspended. Ms Rawson obtained a medical certificate and provided this to the employer.

Employee-Threatens-to-Stab-Supervisor – Wins
Employers are less tolerant of misconduct. Be careful you don’t end up dismissed.

Allegations of misconduct

Ms Rawson remained on paid suspension/sick leave when on 5 February 2020, she received a letter via email which requested her attendance at the employer’s premises for a formal disciplinary meeting scheduled. The letter set out six numbered issues that were considered to represent allegations of misconduct that Ms Rawson would be provided with an opportunity to respond to. Relevantly, the six allegations of misconduct included the stab threat incident of 16 January. The incident of 19 January, and additional allegations including that Ms Rawson had attempted to delete the club’s Facebook account on 21 January 2020.

Ms Rawson and her support person attended this meeting and denied all six allegations of misconduct. Nevertheless, Ms Rawson received a show-cause letter on 10 February 2020 which stated three allegations of misconduct including, the threat to stab her supervisor. The Facebook incident of 21 January 2021 and the alleged breach of confidentiality. Ms Rawson was given until 5 pm on 11 February 2020 to respond but she did not receive this email and did not respond in the required timeframe.

Consequently, Ms Rawson received a termination letter at 5:33 pm on 11 February 2020 via email. This confirmed she had been summarily dismissed with immediate effect and without notice. The termination of employment letter relevantly stated that the applicant had been dismissed for serious and willful misconduct involving. “threatening to stab a fellow employee and attempting to shut down the Facebook site of the Golf Club.” Ms Rawson alleged she did not receive this email communication either.

serious-misconduct-dismissal
Aggressive Behaviour Case, Employee Threatens to Stab Supervisor – Wins Serious misconduct dismissal can be life changing

Valid Reason Found – Still Unfair Due to Flawed Procedure

Commissioner Cambridge held that the misconduct of the employee. Which involved her unreasonable and aggressive workplace behaviour combined with conduct that intentionally sought to damage the business operation of the employer. It was held to be serious misconduct that was plainly inconsistent with the continuation of employment. It established valid reason for the dismissal of the employee.

However, the valid reason for dismissal was evaluated against significant procedural errors in the workplace investigation. Which were evident in the manner that the employer determined and implemented the dismissal of the employee. The Fair Work Commission, as currently constituted, has frequently stated that communication of the advice of dismissal by electronic means such as email or text message, should generally be avoided.

Not notified of the reason for dismissal

Thus, the Fair work Commission held that in this case, the employee was not notified of the reason for her dismissal. Was not given a proper opportunity to respond because of the email communication, which was arguably not received. In any event, Commissioner Cambridge held that the proposition that the employee should respond to the show cause notice within 24 hours was inappropriate and unnecessarily onerous.

Although the employer did not have management specialists or other expertise, human resource specialists or other experts should not be required to ensure that fundamental fairness is observed. That the employer should have adopted an approach that provided the employee with natural justice.

Ultimately, Commissioner Cambridge held that although the employee was dismissed for a valid reason involving her serious misconduct. The significant procedural defects evident in respect of the determination and implementation of the dismissal of the employee. Has rendered the summary dismissal to have been harsh and unreasonable. The employee’s dismissal had been found to have been unfair in this instance.

Importance of Procedure in Aggressive Behaviour allegations

The unfair dismissal case of Michelle Rawson v Mudgee Golf Club Ltd. Before the Fair work Commission in NSW, demonstrates that despite having a valid reason for dismissal. The deficiencies in the process and a flawed workplace investigation may still render the dismissal unfair. Even in the absence of a special human resources team. An employer will still be required to have basic common sense in regards to what is fundamentally fair.

This includes putting forward the allegations to the employee. Ideally in person or via phone/Zoom, allowing the employee to respond within a reasonable timeframe. Instigate a show-cause process that ensures fundamental fairness and natural justice.

Employee Threatens to Stab Supervisor – Wins

raises important considerations around the issues of serious misconduct. If you wish to discuss the allegations aggressive behaviour against you. Your unfair dismissal or a flawed investigation. Please contact 1800 333 666. We can assist you in assessing your eligibility to lodge a claim or how to move forward.

We are A Whole New Approach P/l, we are not lawyers, but leading workplace advisors. AWNA are fiercely independent and only advise employees. We have been dealing with serious conduct issues, workplace investigations for 20 years. AWNA are no strangers how employers use this as an excuse to dismiss you and not pay our your entitlements. Advice is free, prompt and confidential. We work in all states, NSW, Qld, Vic, Tas, SA, WA, call today!

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Seek justice today, give us a call immediately, dismissed for serious conduct will effect your career

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Dismissal Claim Rejected after being One Minute late

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Unfair dismissal claims are complex, get advice immediately.

Dismissal Claim Rejected after being One Minute late

A manager after missing sales targets has had his one-minute-late unfair dismissal application rejected. This was despite the FWC finding he had an arguable case. Dismissal Claim Rejected after being One Minute late, is worth reading to understand the serious of the enforceability of the time line.

The former Employsure business development manager, (BDM) unfair dismissal (F2 application) was late. He offered numerous reasons to explain why his application was not filed until 12.01am on February 6. Including confusion over the date of his dismissal, mental health issues and difficulties with the Fair work Commission‘s online lodgment process.

Delay was not exceptional

Having found in the first instance that the delay was not exceptional or unusual. Noting the BDM waited 21 days after his dismissal before starting his application and repeatedly triggered the system’s timeout function by being inactive for 20 minutes – Fair work Commissioner Leyla Yilmaz turned to consider the case’s merits. In support of his contention that his dismissal was unfair. The manager told Commissioner Yilmaz that prior to the COVID-19 pandemic BDMs were allocated appointments with prospective clients in their territories, his being Gippsland.

Dismissed-don't-be-late-with-your- claim
The time line for unfair dismissal and general protections is strictly enforced.

With the COV-19 pandemic, however, the areas were scrapped and appointments or referrals were sent to “preferred” BDMs, he said”[The BDM] submits that he was not a preferred BDM and was placed in tier 4, which was considered ‘death row’ as no support was forthcoming unlike the other tiered groups,” the commissioner observed.

Commissioner Yilmaz further noted that the BDM was dismissed by email while absent on sick leave after missing a disciplinary meeting scheduled the day after a January 14 performance meeting. The latest of a number to discuss missed sales targets.

“I . . . accept the submissions of Employsure that it went into the meeting on 14 January 2021 without pre-empting the outcome to be a termination of employment,”. Said the commissioner. “If this is the case, then it would be logical that [the BDM], unless advised that a termination of employment was to occur, would not have expected the letter of termination the following day. “Having considered all of this evidence I find that [the BDM] has established that the substantive application is not without merit. “As there is an arguable case, the question of merit is in [his] favor.”

Commissioner Yilmaz
Dismissal-Claim-Rejected-after-being- One-Minute-late
If your unfair dismissal claim is late it will go to a formal hearing to decide if there are exceptional circumstances to allow the claim in. This incurs unnecessary additional cost and time

High hurdle the extension of time

Balanced against other statutory considerations such as his failure to dispute his sacking, however, Commissioner Yilmaz decided to dismiss the matter. “While the application is only one minute late, there remains a high hurdle for an extension of time and the majority of considerations are not in [the BDM’s] favor.”

Highlights how strict it Dismissal Claim Rejected after being One Minute late. This case highlights how strictly enforced the 21 day rule to lodge a unfair dismissal claim. Or a general protections application is enforced by the Fair Work Commission. Many enquires we receive, the employee leave it to the last day to lodge a claim. Then realize the date they were dismissed was wrong.

When is the dismissal day?

Or what is quite common the dismissed employee assume its 21 days from when they receive their termination letter. (its the date from your told you don’t work there anymore). Or hope to just get another job and don’t need to lodge a unfair dismissal claim. Many ex employees were hoping to sort out some sort of arrangement with their ex employer, etc. Don’t leave anything to chance get your claim in early. You can always withdraw your unfair dismissal claim.

been-dismissed-feeling-sad
Stressed out because he did not lodge his claim on time. Too busy preparing the claim and not lodging until he has the perfect claim.

You must reserve your rights, focus on the merits of the unfair dismissal or general protections claim. Not arguing with the Fair work Commission and your ex employer if you have or have not lodged your claim on time.

Don’t ignore the dismissal day

We constantly get calls regarding unfair dismissals and general protections advice. Every time we tell people who enquire be aware of the strict 21 day rule, they go “no worry’s”. “I’ll make a note of that”. Then ring me back 6 weeks latter, I inform them they are out of time, I go “did I tell you about the 21 day rule?” Yes but, then the excuses come.

The 21 day rule is not a guide, its a law, the Fair work Commission rigorously enforce it. I’m sorry if I’m being a bit blunt here, but it is to help you. Lets be honest if your are cranky for unfairly dismissed. You do something about it straight away. You want justice, you want compensation, you may want your job back, you act.

get-help-with-your-unfair-dismissal-claim
Avoid the disappointment, get advice, get the claim in.

Other reasons for late lodgment of unfair dismissal or general protection claims

  1. I was told I could appeal the dismissal, so I waited to lodge it, pending the outcome of the appeal.
  2. I kept waiting for shifts (that didn’t come), I kept ringing up and they said they will call me back.
  3. I hadn’t been on holidays for years, so I thought I would have a holiday first.
  4. I had to relocate, so I thought I would deal with that first (new school for the kids, finding a new home, had to buy a car).
  5. They dismissed me because I had been off due to injury, I waited until I got better to lodge.
  6. Waited until I got my termination letter and separation certificate.
  7. Boss promised me they would get me back, I kept waiting, now I realize that was not true.
  8. Waited until I got my final pay, now its too late to lodge.

The list is endless, I am hoping the list acts as a prompter for you, get your claim in!!.

Dismissal Claim Rejected after being One Minute late, i hope the information provided has been helpful. If your unfair dismissal date is confusing, get advice. We are happy to take your call. Its free 1800 333 666 We are A Whole New Approach . We are not lawyers, we are the nations leading workplace advisors, advice is free, and confidential.

All states, NSW], Vic, Qld, SA, WA, Tas. make the call, explore your rights.

Thai Luu v Employsure Pty Ltd [2021] FWC 2599 (7 May 2021)

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