Question 4: Abel is a full-time staff member of ‘The Wildlife Room’ pet store company. In addition to his daytime work,

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Question 4:
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?