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  • Claiming a tax deduction for expenses for a home-based business

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    Media: Claiming deductions – home-based business expenses
    http://tv.ato.gov.au/ato-tv/media?v=bi9or7onhhq133External Link (Duration: 01:12)

    If you operate some or all of your business from your home, you may be able to claim tax deductions for home-based business expenses in the following categories:

    • occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums)
    • running expenses (such as electricity, phone, decline in value of plant and equipment, furniture and furnishing repairs, cleaning)
    • the expenses of motor vehicle trips between your home and other locations, if the travel is for business purposes.

    For a summary of this content in poster format, see Home-based business expenses (PDF, 456KB)This link will download a file

    There are recent changes to claiming your tax deductions:

    • temporary shortcut method – from 1 March 2020 to 30 June 2022, you may have the option of an all-inclusive 80 cents per work hour temporary shortcut method
    • tax depreciation incentives – you may be eligible for an immediate deduction or an accelerated rate of depreciation under one of the tax depreciation incentives (such as temporary full expensing).

    When you sell your home, you may have to pay capital gains tax (CGT). It's important to keep the right records to work out your deductions or CGT.

    If you’re entitled to goods and services tax (GST) input tax credits, you must claim your deduction in your income tax return at the GST exclusive amount.

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    What a home-based business is

    A home-based business is one where your home is also your principal place of business. That is, you run your business at or from home, and have a room or space set aside exclusively for business activities.

    A home-based business can be run:

    • at home – that is, you do most of the work at your home. An example is a dressmaker who does all their work at home, with clients coming to their home for fittings.
    • from home – that is, your business doesn't own or rent a separate premise. An example is a tiler who does all their work on clients' premises, but does all their record keeping, and stores all their tools and supplies, at home.

    If your home is not your principal (or main) place of business but you do some work from home, you may still be able to claim a deduction for some of your expenses relating to the area you use.

    Examples of businesses that can be home-based

    Industry

    Occupation

    Accommodation, cafes and restaurants

    Bed and breakfast operator, caterer, campground owner

    Agriculture, forestry and fishing

    Shearer, market gardener

    Communication services

    Mail service provider, web designer, desktop publisher, graphic designer

    Construction

    Bricklayer, plumber, carpenter, tiler, fencer, electrician, builder, engineer, draftsperson, cabinetmaker, woodworker

    Cultural and recreational services

    Film editor, sound recordist, artist, musician, piano tuner

    Education

    Tutor, lecturer, music teacher

    Finance and insurance

    Financial adviser, consultant, accountant, bookkeeper, insurance broker

    Health and community services

    Dietician, chiropractor, counsellor, physiotherapist, psychologist, massage therapist

    Personal and other services

    Personal trainer, photographer, hairdresser, beautician, child-minder, dressmaker, event manager, cake decorator, jeweller, pet groomer

    Property and business services

    Plant hire or leasing operator, architect, surveyor, interior decorator, house painter, cleaner, gardener, service and repair operator, sign-writer, tree lopper

    Transport and storage

    Courier, freight carrier, removalist

    Wholesale and retail trade

    Fresh fruit wholesaler, confectionery supplier, florist, watchmaker, party-plan operator, telemarketer

    Type of business structure

    If you carry on a home-based business, you need to use the right method to calculate your expenses based on your business structure.

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    Last modified: 15 Oct 2021QC 33864