If you operate a small business (not a non-profit organisation), then the following may be of interest to you.
Claiming your business expenses
Running a business at or from your home is similar to running any other business. That is, if you operate a home-based business, you can generally claim similar expenses to a business that is not home-based. However, two types of expenses that are specific to carrying on a home-based business are:
- expenses related to the area of your home you use for business
- motor vehicle expenses you incur when travelling between your home and other business locations.
Occupancy expenses
Occupancy expenses are those expenses you pay to own, rent or use your home, even if you are not carrying on a home-based business. Occupancy expenses include:
- rent or mortgage interest
- council rates
- land taxes
- house insurance premiums.
You must pass the interest deductibility test before you can claim occupancy expenses. This means you must have an area of your home set aside exclusively for your business activities, such as an office or workshop. Please beware, if you satisfy the interest deductibility test, you may have to pay capital gains tax (CGT) on part of any capital gain you make when you sell your home.
Motor vehicle expenses
You generally cannot claim the cost of trips between home and your workplace as this is a private expense. However, you can generally claim the cost of any business related travel.
This means 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.
You could claim the cost of travel to:
- a client’s premises if you are working there or delivering some documents
- purchase equipment or supplies
- do your banking
- the post office to mail out invoices
- see your tax adviser about a matter related to your business.
If you have any further questions regarding Home Based Business please feel free to contact me.
