If you run your business from home, you’re not alone—and you may be entitled to valuable tax deductions.
The ATO allows deductions for the portion of your home expenses that relate directly to your business.
Let’s break down the essentials so that you know what you might be able to claim on your tax return.
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What Counts as a Home-Based Business?
A home-based business is one where a part of your home is used for business—whether that’s a dedicated study or even a corner in your living space.
The key rule is: only the business-use portion of expenses is deductible.
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Two Types of Expenses
- Running expenses cover day-to-day costs like electricity, internet, phone, cleaning, and repairs. You can claim these even if your workspace isn’t a distinct “office” room.
- Occupancy expenses include rent, mortgage interest, council rates, and insurance. These are only deductible if your workspace acts like a true “place of business”—for example, it’s used exclusively, clearly separate from your personal living space, or used by clients.
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How to Calculate Your Expenses
The ATO offers a few easy-to-use methods—choose whichever best suits your situation:
- Fixed-rate method: Claim 70 cents per hour worked from home. This covers energy, phone, internet, stationery, and computer consumables. Just keep a record of your working hours.
- Actual cost method: Claim your actual expenses (but only the business portion), provided you have the receipts to back it up.
- Floor area method: If you have a designated workspace, apportion occupancy costs based on the floor area used for business and the time it’s used.
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Other Important Considerations
- Depreciation: You can separately claim depreciation for business-use items like laptops, phones, or office furniture—regardless of whether you use the fixed-rate method.
- Capital Gains Tax (CGT): If you sell your home and have claimed occupancy expenses, a portion may not be covered by the main residence exemption.
- Records: Keep detailed records—including diaries of hours worked (if using fixed-rate), receipts, and calculations—for at least five years.
Understanding and claiming the right home-based business deductions can mean real savings—if you do it the right way. Keep it simple: choose the method that works best for your business, track everything, and only claim your fair share of the expenses.
Your accountant can help you choose the best method for your situation and ensure you’re both compliant and maximising your entitlements. Why not speak with one of our trusted team, and find out how we can help you and your business today?
