If your home is also your place of business, you can claim income tax deductions for a portion of the costs of owning, maintaining and using your home for this purpose. When you sell your home you may be liable for capital gains tax.

Your home is your place of business if you run your business from home, and a room is set aside exclusively for your business activities. Examples of a place of business include:

  • a small business operator whose main office is in their home
  • a tradesperson or craftsperson who has their workshop at home
  • a doctor or dentist who has their surgery or consulting room at home.

Deductions you can claim

If you run your business from home, you may be able to claim the following expenses:

  • Utility costs – The cost of using a room’s utilities, such as gas and electricity – these should be apportioned according to actual usage.
  • Business phone costs – if you used a telephone exclusively for business. You can claim for the rental and calls, but not the installation costs. If you used the telephone for both business and private calls, you can claim a deduction for business calls.
  • Depreciation of office plant and equipment (for example, desks, chairs and computers) – if you also used the equipment for private purposes, your claim must be apportioned .
  • Decline in value of curtains, carpets and light fittings.
  • Occupancy expenses – your costs of owning or renting the house (such as rent, mortgage interest, insurance and rates). You can claim the portion of these costs that relates to the room or workshop you use as a place of business. A common method of working out how much to claim is the floor area (as a proportion of the floor area in your whole home).
  • Personal services income (PSI) – if your income includes PSI, you may not be able to claim a deduction for occupancy expenses.

Records you must keep

You must keep records of home expenses, such as:

  • receipts or other written evidence of your expenses, including receipts for depreciating assets you have purchased
  • diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot get any kind of evidence for, regardless of the amount
  • itemised phone accounts from which you can identify work-related calls, or other records, such as diary entries (if you do not get an itemised account from your phone company)
  • a diary you have created to work out how much you used your equipment, home office and phone for business purposes over a representative four-week period.

Article adapted from URL: https://www.ato.gov.au/Business/Income-and-deductions-for-business/Running-your-business-from-home/
Sighted: 10 December 2016

Disclaimer: The information contained in this article is general in nature without taking into account any particular person’s situation.  You should consider whether the information is appropriate to your situation and it should not be relied upon as a substitute for specific professional advice.

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