Home Based Business Tax Deductions

If you operate your business at or from home, the ATO allows additional deductions for some of the specific expenses relating to the area used for home-based business purposes. The expenses specific to running a home-based business include occupancy expenses, running expenses and motor vehicle expenses.

Occupancy expenses 

Occupancy expenses can include:

  • rent;
  • mortgage interest;
  • council rates; and
  • house insurance premiums.

Running expenses

Running expenses cover the increased costs of using facilities within your home because of your business activities such as:

  • utility expenses;
  • business phone costs;
  • the decline in value of plant, equipment, furniture and furnishings; and
  • cleaning costs.

Alternatively, you can claim a deduction for your home business area at a fixed rate per hour based on actual use or an established pattern of use instead of recording actual occupancy and running expenses.

Be aware that you may have to pay capital gains tax (CGT) when you sell your home if you have used any part of it for business purposes, but you do not have to pay CGT for any periods you did not use your home for your business.

It is important to keep records for CGT purposes since you may have to pay CGT even if you do not claim deductions for your home business, owned your home outright before you started using it for your business, or have not yet made a profit.

Motor vehicle expenses

Travelling between your home and your workplace are normally deemed to be private expenses, and are therefore not deductable.

However, if you are operating a home based business you can claim motor vehicle expenses for trips between your home and other places if the travel is for business purposes.

For example, you can claim the cost of travelling to see a client, delivering documents, purchasing equipment or supplies, doing your banking or driving to your tax advisor.

You can choose the method to calculate motor vehicle expenses that best suits your circumstances. Obtain advice from your accountant tailored to your particular personal and financial circumstances.

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