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Question: mac is a fulltime staff member of the regular beauty...

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Mac is a full-time staff member of The Regular' beauty company in the administration department. The Regular originally had an office in South Kensington, Melbourne, where Mac was based until it was closed in early 2019. The remaining sites in Victoria are all retail shopfronts with all Victorian administration staff now working from home.

As a result, Mac has set up a dedicated space, representing approximately one-fifth of the home, to be the home office out of which she undertakes her employment activities. Mac does not install any signage at the front of the home to indicate the office and Mac does not see clients or colleagues on the premises. Mac does travel from the office from time to time, whether to meet with colleagues or clients. 'The Regular' has provided Mac with a phone and computer, whilst Mac is expected to provide the internet access and filing cabinet to store work related documents. Otherwise, Mac keeps a piece of exercise equipment in one corner, which is used by her and her family members on a regular basis.

Mac does not view the home office as a place of business. Although Mac conducts business via Skype and other online applications, the space is readily adaptable for both private and domestic purposes.

REQUIRED:

Advise Mac of the tax consequences in regard to the home office by answering the following three questions:

1. Is Mac eligible to claim a deduction for a proportion of occupancy expenses in relation to the home office space? (4

marks) 2. Is Mac eligible to claim a deduction for a proportion of running expenses in relation to the home office space? (4 marks) 3. What impact does the home office space have on the main residence exemption? (2 marks)

Your answer should include references to appropriate legislation, case law and tax rulings. Disregard GST.

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