Can You Claim Business Tax Deductions When You Run a Business From Home?

Posted on: 9 January 2023

When you first start out in business, you may want to keep your costs as low as possible and have decided that you will work from home. You know that you need to keep close track of your expenses, record all your transactions to account for tax when it's due, and run a profitable operation. Yet did you know that you can claim some deductions for that home-based office? If you didn't realise that was an option, what do you need to know, and should you get some help to make sure you don't miss another trick?

Operate from Home 

The good news is that the ATO allows every small business owner to claim deductions when they operate from their primary residence. The authority allows you to apportion some of your household costs insofar as they relate to your "office space."

Make Calculations

Ideally, you should set aside a separate room as an office, and you will then calculate the size of this room in relation to your total home footprint. Once you know this figure, you can use that percentage to claim a deduction against your heating, cooling and lighting bills.

Setup Costs

You may have to buy some furniture and computer equipment when setting up a home office. In this case, you might get an office desk, a comfortable chair, extra lighting, a new computer and other ancillaries. Where those capital items are relatively cheap, you may be able to claim their full amount at the end of your first year. Otherwise, you will need to depreciate them over time, so you receive back the value of what you paid, but you essentially get it in instalments.

Equipment and Furnishings

You can claim whenever you need to repair any home office equipment, furnishings or furniture. If you need to buy consumables like stationery or printer ink, include those expenses as well.

Maintenance and Cleaning

Don't forget that if any maintenance costs are associated with your home working area, these should be allowable. These could include the costs of cleaning that area. If you employ a domestic cleaner, you could apportion their costs here.

Flat Rate Calculations

The ATO also has a flat rate allowance that may be applicable in your case. This is based on the number of hours you work in your home office each day and is designed to cover the costs of cooling, heating or lighting.

Rent and Mortgage Payments

There may also be some additional complications when it comes to rent or mortgage interest. You may be able to claim these when you actually run a business from the home.

Get Expert Advice

If you want to be sure that you are making the correct calculations and not missing out, engage the services of a business accountant.

For more info, contact a company like Harwood Chartered Accountants.