Tax for the home-based business

Tax for the home-based business

Running a home-based business? Here’s what you need to know about some tax deductions you can claim.

No premises

If you just work from home but you provide your services elsewhere, you can still claim a deduction for expenses that relate to the work you do from home.

For example, if you don’t have any business premises and do most of your work on clients’ premises you can still claim deductions for the cost of things like electricity and the depreciation of equipment.

Think about a tradie who completes most of their work at clients’ premises but does their paperwork at home. The tradie can claim a deduction for all the expenses related to working from home, such as:

  • electricity used while working from home
  • depreciation of computer
  • depreciation of office furniture

Home premises

If your place of business is part of your home you may be able to claim a proportion of occupancy expenses, like rent or mortgage interest, rates and insurances.

If your place of business is part of your home you may be able to claim a proportion of occupancy expenses

The area must be used exclusively for business purposes and be clearly identifiable as a place of business – for example, having a sign identifying your business at the front of your house and having clients visiting your business. The area cannot be easily suitable or adaptable for private purposes.

Consider a naturopath who has converted a garage to a reception area and consulting rooms.

Just like the tradie, the naturopath can claim a deduction for expenses that relate to the work being done at home, like electricity and equipment.

They can also claim a deduction for occupancy expenses, like a proportion of:

  • mortgage interest
  • rates
  • insurances

This is because the place of business is part of the home and used exclusively for business. The naturopath works out how much of the home is dedicated to business use and claims that percentage of the occupancy expenses.

When the property is sold, this same percentage is used to work out the capital gains tax on the business portion of the property. Although your main residence is exempt from capital gains tax, the portion that relates to your principal place of business is not exempt.

For more information visit ato.gov.au.

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