Home office expenses
You can claim home office expenses if you:-
- Run a business from your home, or
- Undertake work duties from home.
Substantiating a claim to the ATO’s satisfaction is paramount.
A classic case of running a business from home is a doctor. To one side of the house will be a shingle, an entrance, reception, waiting rooms and doctors’ rooms. It may be run from home but it looks like a business. In such cases, a claim for occupancy expenses can be claimed. A claim can also be made for running expenses as can someone who simply undertakes some of their work at home.
What home office expenses can be claimed for a place of business?
- Running costs of heat light & power.
- Occupancy costs – such as rent, or mortgage interest, rates as insurance.
- Other costs such as phone costs, depreciation of fittings.
If not separately metered, some of these costs will need to be apportioned. Apportionment can be made on a percentage area basis or by tracking business usage.
Where home is a place or work, travel from the work place for work purposes is deductible (whereas travelling from home to work is private).
A word of warning though
If home is a place of business, then the home will lose part of its capital gains tax exemption. Tax will only be payable when the home is sold (but note that Capital Gains Tax does not apply to assets bought before 19th September 1985).
That said, the gain may not be that significant. If the work area was say 20% of the home area and only used that way for 5 years out of the 30 years the home was owned, then the taxable gain would only be 3.33% of the total gain (before any loss is offset or 50% Capital Gains Tax discount applied).
The ATO outlines some of the basis in the following e-mail.
We would welcome the opportunity to discuss your situation with you.
We will examine running expenses in a future blog.
At MRS, we will spend today planning for your success.