Running a business from home

Posted on Posted in Capital Gains, Small Business, Taxation

Running a business from home?

In a digital age with cloud technology more and more Australians are running a business from home. The roll out of faster broadband and easy access to gadgets such as laptops, tablets and phone apps has provided many Australians flexibility to avoid traditional work hours to accommodate their family time.

The fact that most Australians find it very frustrating in our major cities dealing with peak hour traffic and public transport is another incentive to consider working from home. However, what are the tax implications of running a business from home?

The deductible expenses that crop up from working at home can be viewed as being:

  • ‘occupancy’ expenses
  • ‘running’ expenses

Deductions for occupancy

You can generally claim the same percentage of occupancy expenses as the percentage area of your home that is used to make income (for example, if your home office is 10% of the total area of your home, then you can claim 10% rent costs, council rates and so on).

The guidelines are very clear that you must have an area of your home specifically for work. To claim a lounge room as your home office is not allowed as the room is accessible by all occupants and predominantly used for private purposes. A separate bedroom if at all possible would meet the ATO guideline criteria.

If you own your house and wish to claim a percentage of interest on your home loan, you must include the same percentage as a Capital Gain when you sell your home.


Running expenses

In general, running expenses are costs that result from you using facilities in your home. Business costs such as electricity, gas, phone bills and perhaps cleaning costs. But again you can only claim a deduction for the amount of usage from the business, not general household expenses.

You can claim outright costs directly associated with running your business such as Computers, Furniture and other assets if there is no private portion. From the 1st July 2015, if your business turnover is less than 2 million, you can write off all assets that cost less than 20 thousand dollars each.


Here is a link to Australian Taxation Office for more information on home based business deductions.