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AJML Accountants Update – April 2021

Home-based business – Part 1

This information will help you if you are a small business owner claiming deductions for the costs of using your home as your principal place of business – whether you use a registered tax agent or lodge your own tax return.

Types of expenses

There are two types of expenses for your home-based business – running expenses and occupancy expenses. Whether you can claim running expenses only, or both running and occupancy expenses, depends on whether you have an area of your home set aside as a ‘place of business’.

Running expenses

Running expenses are the increased costs from using your home’s facilities for your business, for example:

  • the costs of using a room (such as heating, cooling and lighting)
  • cleaning costs
  • landline phone and internet costs
  • decline in value (depreciation) of your business furniture and equipment
  • costs of repairs to your business equipment.

Heating, cooling and lighting

  • If you have an area set aside for your business, you can split your heating, cooling and electricity bills based on the proportion of the floor area of your home that you use for your business and proportion of the year that you used it for business.
  • Alternatively, you can use a fixed rate of 52 cents an hour for each hour that you operate your business from home – based on either your actual use or pattern of use. This covers heating, cooling, lighting, cleaning, and the decline in value of furniture and furnishings (you need to work out other expenses separately).

Home phone and internet

  • For home (landline) phones, you can claim your business calls and a portion of the line rental costs.
  • For internet expenses, you can claim the proportion of time or data you used your internet for business uses.
  • You can calculate the business portion of your home phone and internet using an itemised account or pattern of use. you are leaving Australia permanently or for more than one financial year

Occupancy expenses

Occupancy expenses are the expenses that you pay to own or rent your home, for example: mortgage interest or rent

  • council rates
  • land taxes
  • house and contents insurance.

Calculating your claim

You can claim running expenses if you run your business from home, such as in a separate study or a desk in a lounge room, even if it doesn’t have the character of a ‘place of business’.

To calculate the running expenses of your home-based business, you can use one of the methods described below or any other method as long as:

  • it is reasonable in your circumstances
  • you exclude your normal (private) living costs
  • you have records to show how you calculated the business expense.