In his weekly business finance post our CFO Greg Taylor looks at what you can claim if you, like a growing number of Australians, run a home-based business.
According to Business Enterprise Centres Australia, more than 68 per cent of Australia’s micro and small businesses are home-based. It says its data is backed by ABS data and that the number of home-based businesses is growing.
A common business finance issue for home-based businesses is claiming working from home expenses. To answer this question I turned to the authority on the matter – the Australian Tax Office (ATO).
The ATO’s website says that if you operate a business in full or in part from your home, you may be able to claim a deduction for occupancy expenses (things such as rent, mortgage interest, rates, land taxes and house insurance premiums) and running expenses (things such as phone rental and business calls, internet fees, depreciation of office furniture and equipment, additional heating, cooling, lighting and cleaning expenses).
If your home is your place of business and you have an area set aside exclusively for business activities, you may be able to claim both running and occupancy expenses. If you carry on your business elsewhere and also do some work at home, you cannot claim occupancy expenses even if you have a home work area set aside.
A word of warning. If your home is your place of business, Capital Gains Tax (CGT) may apply when you sell your home even if you haven't claimed mortgage interest as a deduction.
To work out what you may claim you should look at the additional costs you incur because you conduct business activities from home. Don’t include any part of an expense that is related to private use. Keep records for things such as your electricity and phone bills that clearly support your claims.
You also need to have a reasonable estimate of your home's value at the time you started your business.
This is general information. Get some advice from your accountant or the ATO on what you can specifically claim and the tax implications of those claims.
This blog is from Greg's regular business finance column in the Post newspaper.