Claiming a tax deduction for expenses for a home-based business

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Published: 11/06/2020

Claiming a tax deduction for expenses for a home-based business

If you operate some or all of your business from your home, you may be able to claim tax deductions for home-based business expenses in the following categories:

  • occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums)
  • running expenses (such as electricity, phone, decline in value of plant and equipment, furniture and furnishing repairs, cleaning)
  • the expenses of motor vehicle trips between your home and other locations, if the travel is for business purposes.

For a summary of this content in poster format, see Home-based business expenses (PDF 391KB)This link will download a file.

To make it easier for people to claim deductions for working from home due to COVID-19, we are accepting a temporary shortcut method from 1 March 2020 until at least 30 June 2020. This will allow people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. It also applies to home-based businesses.

When you sell your home, you may have to pay capital gains tax (CGT). It’s important to keep the right records to work out your deductions or CGT.

If you’re entitled to goods and services tax (GST) input tax credits, you must claim your deduction in your income tax return at the GST exclusive amount.

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What a home-based business is

A home-based business is one where your home is also your principal place of business. That is, you run your business at or from home, and have a room or space set aside exclusively for business activities.

A home-based business can be run:

  • at home – that is, you do most of the work at your home. An example is a dressmaker who does all their work at home, with clients coming to their home for fittings.
  • from home – that is, your business doesn’t own or rent a separate premises. An example is a tiler who does all their work on clients’ premises but does all their record keeping, and stores all their tools and supplies, at home.

If your home is not your principal (or main) place of business but you do some work from home, you may still be able to claim a deduction for some of your expenses relating to the area you use.

Examples of businesses that can be home-based

Industry

Occupation

Accommodation, cafes and restaurants

Bed and breakfast operator, caterer, campground owner

Agriculture, forestry and fishing

Shearer, market gardener

Communication services

Mail service provider, web designer, desktop publisher, graphic designer

Construction

Bricklayer, plumber, carpenter, tiler, fencer, electrician, builder, engineer, draftsperson, cabinetmaker, woodworker

Cultural and recreational services

Film editor, sound recordist, artist, musician, piano tuner

Education

Tutor, lecturer, music teacher

Finance and insurance

Financial adviser, consultant, accountant, bookkeeper, insurance broker

Health and community services

Dietician, chiropractor, counsellor, physiotherapist, psychologist, massage therapist

Personal and other services

Personal trainer, photographer, hairdresser, beautician, child-minder, dressmaker, event manager, cake decorator, jeweller, pet groomer

Property and business services

Plant hire or leasing operator, architect, surveyor, interior decorator, house painter, cleaner, gardener, service and repair operator, sign-writer, tree lopper

Transport and storage

Courier, freight carrier, removalist

Wholesale and retail trade

Fresh fruit wholesaler, confectionery supplier, florist, watchmaker, party-plan operator, telemarketer

Type of business structure

If you carry on a home-based business, you need to use the right method to calculate your expenses based on your business structure.

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