Abel is a full-time staff member of ‘The Wildlife Room’

Abel is a full-time staff member of ‘The Wildlife Room’ pet store company. In addition to his daytime work, Abel is required by his employer to work from home on a regular basis. This work from home consists entirely of managing the extensive paperwork of the business and maintaining the software program used to run the business. The work from home does not involve seeing any clients and Abel does not sell any pets from his home. ‘The Wildlife Room’ has agreed for Abel to establish and maintain a home office, which Abel has done for all of the 2021 tax year. Abel lives in Camperdown (a suburb of Sydney) and his residence consists of two bedrooms, one bathroom, one lounge-room and one kitchen. Abel lives on his own and so he uses the so-called ‘second bedroom’ solely and exclusively for this ‘home office’. The area made up of the ‘second bedroom’, used for his home-office represents approximately 1/5 th of the total living space in the house area. Abel’s employer acquired standard office furniture to furnish the space, including a desk, chair, lamp, filing cabinet, printer and other general office supplies. Abel did not pay at all for these office furniture items and the employment agreement provides that once Abel’s employment ends that these items are to be returned to the employer. Abel does not install any signage to suggest from the street front that the office is present. Abel also continues to use the laptop and phone that his employer provides. No clients or colleagues visit the home or home office and there is no available space for car parking if clients were to visit the premises. Abel works from home 5 days per week. Abel uses the office space for his employment only and no personal effects are stored in the ‘second bedroom’ except for a piano that remains in one corner. For the year ended 30 June 2021, Abel advises you that his home electricity expense totalled $3,000 and that the house insurance bill was $1,500 and the council rates were $3,000. Abel also advises you that he paid $15,000 in home mortgage interest and that his water rates totalled $1,600.

Required:

a) Is Abel eligible to claim a deduction for a proportion of occupancy expenses in relation to the home office space?

b) Is Abel eligible to claim a deduction for a proportion of running expenses in relation to the home office space?

c) What impact does the home office space have on the CGT main residence exemption?

d) How would your answer to (a) change if Abel was self-employed and did see clients at his home from time to time but still only used his ‘second bedroom’ for his business activities?