Most home buyers purchase a property so they can give themselves and their family a home. This is much the same with self-employed buyers – except instead of their families, some of them end up finding a home for their businesses.
According to the Australian government, just under 1 million people run their businesses from their place of residence. And why wouldn’t you? Flexible hours, no work uniform, no one to look over your shoulder – and let’s not forget the opportunity to kit out a sweet home office.
On top of that, there are a number of fantastic tax deductions you can claim. If you’ve bought a property only to turn it into your place of business, here are four you’ll want to keep in mind when the end of the tax year comes.
If your home is also where you run your business from, then expenses like the interest on your self-employed home loan, rates and insurance can be written off your tax bill.
Running your business, you’ve got to be on the phone a lot: Calling clients, speaking with suppliers, booking appointments – all of it can add up when your telephone bill comes in. But if the phone is used solely for business, you can deduct the call cost from your tax. If you have a phone devoted exclusively to your business, you can also claim the cost of renting it – installation costs are non-deductible.
Normally, if you’re an owner-occupier of your property, the costs of maintaining your property and mortgage are just expenses you’ll have to grin and bear. But if your home is also where you run your business from, then expenses like the interest on your self-employed home loan, rates and insurance can be written off your tax bill. Most commonly, this involves working out the proportion of your home’s total floor area that is taken up by the room you use for business, and applying this percentage to the costs.
Any utility costs that go toward a business – such as electricity – are deductible. And good thing too the Australian government estimates gas and electricity to cost anywhere between $60 and $100 a week. We’d say that’s a conservative estimate, too. The trick is separating this from your personal use of said utilities. In this situation, it would help to have a log book in which you can record your daily use.
Before deciding to move your work home, just be aware of some of the other tax implications. As we’ve mentioned before, running a business from your property means you will only get a partial exemption from the capital gains tax when you sell your home. It’s something to think about!