Claims for a home computer ‘lab’ of a senior sales employee denied

In Hartley and Commissioner of Taxation [2026] ARTA 1590, the Tribunal considered whether a senior IT sales employee could deduct substantial expenditure on his home computer ‘lab’.
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Mr Hartley was employed as a Domain Sales Manager at Ericsson Australia. He contended his role extended beyond sales and that is also encompassed acting as an innovator, which included identifying and developing new product opportunities and providing thought leadership within the industry.

It was within this context that Mr Hartley sought to claim a substantial amount of work-related and capital allowance deductions for his home computer ‘lab’ in the 2022 income year. While these amounts were denied by the ATO at audit and at objection, what was ultimately in dispute before the Tribunal was whether the taxpayer could claim deductions of $31,870, relating mostly to digital storage devices, computers and monitors, computer software and subscriptions to various computing services.

Although the claim was quite significant, Mr Hartley gave evidence of various projects undertaken from his home computer ‘lab’. Of relevance is the fact that these projects were actively encouraged by and benefited his employer, which included:

• A network virtualisation project that began before he joined Ericsson, but which the company later sought to develop and market;
• Cloud infrastructure work undertaken through an industry collaboration that involved Ericsson as an industry member; and
• Work on video interface technology, which was the subject of an Ericsson press release, with the technology also being deployed in its business.

While it was accepted that Mr Hartley had a high-level leadership role that involved having specialized expertise and contributing to the development of marketable technologies, the Tribunal ultimately sided with the ATO concurring that the deductions should be denied in full.

The Tribunal’s rationale was largely based on its view that the activities were undertaken out of Mr Hartley’s general interest in IT and as part of maintaining his general professional standing, rather than in the performance of his immediate job responsibilities for Ericsson.

Citing the High Court decision in Federal Commissioner of Taxation v Hatchett [1971] HCA 47, the mere fact Ericsson encouraged Mr Hartley’s activities was not enough to warrant a deduction. The problem seemed to be two-fold. First, Ericsson neither required the activities nor permitted him to use Ericsson equipment to perform these activities. Also, there was evidence to suggest that the activities were undertaken at home so that he could retain the benefit and ownership of the development, should he leave Ericsson’s employ.

Especially where the work-related deductions being claimed are significant, this Tribunal decision is a reminder for practitioners to consider whether the client’s costs relate to activities that fall outside the scope of client’s role and duties. The challenge is that the ATO has consistently signaled work-related deductions as one of their key focus areas, but this is not always an easy area of the law. While it is generally helpful if an employer encourages the activities, this Tribunal decision and the ATO’s guidance in TR 2020/1 makes it clear that this will not necessarily be sufficient.

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