How to correctly claim your home as a place of business

Perhaps you’ve turned a spare bedroom into an office. Or, you could be using your shed to operate business machinery from. If you’re doing either of these, it’s likely that some of your household costs are overlapping with operational business costs.

This article will focus on operating a business from home as opposed to simply working from home. When you are working from home, you are limited to claiming running expenses. When your home is a place of business, you are able to claim occupancy expenses and running expenses.

Occupancy expenses are those paid to own rent or use your house and include:

  • Mortgage interest or rent
  • Council rates
  • House and contents insurance premiums

Running expenses include:

  • Electricity and gas
  • Telephone and internet services
  • Cleaning

To meet the requirement for a place of business, the area of your home must have the character of a place of business, which includes:

  • Cleary identifiable as a place of business (signage outside the home)
  • not readily suitable or adaptable for private or domestic use
  • Used exclusively for carrying on your business
  • used regularly for visits by your clients

How do we calculate your relevant home office expenses?

First, we need to understand the physical area of your home being dedicated to work.

You need to calculate the total physical area in the house that’s dedicated to business. Here’s an example:

  • The total house area is 150m2
  • The garage is used exclusively for storing business assets – 36m2
  • A small room is used exclusively as a business office by the owners – 9m2
  • Total area for business use: 36m2 + 9m2 = 45m2.
  • Percentage of the home being used for business: 45m2/150m2= 30%

In this case, 30% of each expense can be claimed as relevant to the business. This percentage can be applied to:

  • Interest on a mortgage, or rent
  • Insurance (both home and contents)
  • Rates (water and land)
  • Electricity and gas
  • Security and alarms costs

Other, more specific expenses can also be claimed based on pattern of use and apportioning business use.

  • Internet
  • Home phone line 
  • Repairs and maintenance work on the areas designated for business can become full business expenses
  • Your mobile phone bill, if it’s used mainly for business

There’s an easy way to claim what you’re owed

It’s as simple as keeping a record of your costs.

Save your invoices and bank statements to your Google Drive or keep a spreadsheet and your Beany accountant will review them when it’s time to prepare your financial statements. From there, we’ll work out what can and can’t be claimed!

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