Building and running a successful business can a be an incredibly rewarding experience. It takes time, determination, and discipline; and it is definitely not stress free. If you are running your business from home there are a couple of things you can do to make things a little easier for you.
Running my business from home; what can I claim?
If you are running your business from home, you will be able to claim deductions on the work you carry out at home, as well as any expenses create in using your home for business.
If you are unsure if you fall into the category of a business which operates from home, consider whether you are any of the below, or similar.
- 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.
If your business operates in a similar manner to the examples above, you will be able to claim a deduction for the following:
- The cost of the utilities used in the main room of business. You will need to separate between business use and personal use.
- Business phone costs – if a telephone is used exclusively for business, you can claim for the rental and calls, but not the installation costs. If the telephone is used for both business and private calls, you can claim a deduction for business calls.
- Decline in value of office plant and equipment. If your business equipment is also used outside of business time (for personal use) you will need to separate your use and claim only for business use.
- Decline in value of curtains, carpets and light fittings.
- You are able to claim a portion of occupancy expenses which include rent, mortgage interest, insurance, and rates. This portion is in relation to the room/workspace/workshop that is in use by your business.
I work from home for my boss, can I claim these deductions?
Your home office is not considered a place of business if you are working for an employer, even if the work requires that you work outside of your normal business hours.
However, if your income includes personal services income (PSI), you may not be able to claim a deduction for occupancy expenses.
Capital Gains and the main residence exemption
In general, you are able to ignore a capital gain or loss you make when you sell your home or main residence.
However, you will not be able to receive a full main residence exemption if your home is your principal place of business, although you’re are most likely entitled to a partial exemption.
To understand the capital gain that is not exempt, you will need to take into account several factors including:
- proportion of the floor area of your home that is set aside to produce income
- period you use it for this purpose
- whether you’re eligible for the ‘absence’ rule
- whether it was first used to produce income after 20 August 1996.
You could save your future self a fair amount of money by getting a valuation of your home at the time you first use it as your place of business, so that if you ever end up selling the property, you will not have to pay more capital gains taxes than is absolutely necessary.
© Fitzpatrick Group 2017
Bryn deals directly with assisting small to medium business clients, whether in early stage or mature, in relation to their Accounting, Taxation, and Business Growth. If you’d like to speak with Bryn about growing your business, contact us