Many clients ask “Can I claim Home Office Expenses?” There is great information on the ATO website, and links for more info and a cool expense calculator, as part-reproduced here –
If you are a sole trader and your home is also your place of business you can claim tax deductions for a portion of the costs of owning, maintaining and using your home for this purpose. When you sell your home you may be liable for capital gains tax.
If you operate a business at or from your home, you may be able to claim a deduction for some of the expenses relating to the area you use for business purposes.
These expenses can be divided into two broad categories:
- Occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums);
- Running expenses (such as gas and electricity, phone, decline in value of plant and equipment, decline in value and cost of repairs to furniture and furnishings, cleaning).
As for motor vehicles, if you are carrying on a home-based business you can claim the cost of trips between your home and other places if the travel is for business purposes.
Generally, you can ignore a capital gain or loss you make when you sell your home, unless you have used any part of it for business purposes.
- All outcomes provided by this calculator are based on the information you provide and the deduction rates available at the time of calculation. You should use the outcomes as an estimate and for guidance purposes only;
- You need to self-assess your eligibility and entitlement to a deduction for home office expenses before using this calculator.
Warning – Capital Gains Tax on Sale of Home
Be aware that if you claim home expenses for business, then Capital Gains Tax may apply if you sell the home.
The ATO explains further (and gives examples there) –
Generally, you can ignore a capital gain or loss you make when you sell your home. However, you may have to pay CGT when you sell your home if you have used any part of it for business purposes.
CGT will not apply if any of the following apply:
- You operate your business from a rented home;
- You do not have an area specifically set aside for your business activities;
- You operate your business through a company or trust.
In most cases, the portion of any capital gain on your home that is taxable is the same as the portion for which you could claim a deduction for interest. Generally, this is based on the floor area of your home you have set aside for business, for example 10%.
You do not have to pay CGT for those periods you did not use your home for your business.
If you have a capital gain because you use your home for business purposes, you may be able to apply one or more of the small business CGT concessions to reduce your capital gain.
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