Maximising your tax return as a home-based business

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Small business owners may be able to claim deductions for the costs of using your home as a principal place of business when filing your 2019 income tax return.

Tax deductions may be claimed for the business portion of expenses that include electricity, cleaning, rent payments or mortgage repayments. However, it can be difficult to ensure you are claiming expenses you are entitled to. How you operate the business out of your home will determine the types of expenses that may be claimed. Your business structure will also affect your entitlements and obligations when claiming deductions on home-based business expenses.

Individuals that operate a business as a sole trader or partnership are entitled to claim a deduction for the costs of running their business from home. There are two types of expenses that can be claimed, running expenses or occupancy expenses.

Running expenses refer to the increased costs of using your home's facilities for the running of your business, including:

  • Repairs to your business equipment
  • Heating, cooling and lighting a room
  • Cleaning
  • Phone and internet
  • Depreciation of business furniture and equipment

Occupancy expenses are those that you pay to own or rent your home, including:

  • Mortgage interest or rent
  • Land taxes
  • Council rates
  • Insurance

Typically, those that are eligible to claim occupancy expenses can also claim running expenses. Occupancy expenses are calculated based on the proportion of the floor area of your home that is used for the business and the proportion of the year that it was used. To calculate the running expenses of your home-based business, you must ensure that you exclude your private living costs and that you have records to show how you calculated the expense. Records that need to be kept include written evidence, tax invoices and receipts, which should substantiate your claims for all home-based business expenses.

You may consider consulting a trusted advisor or registered tax agent to ensure that you meet all obligations when claiming deductions in your tax return.


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