Tax advantages of home business

Make sure you are ready to take advantage of the tax benefits of working from home. JANE SHELTON

Jane Shelton

By Jane Shelton

As I sat in my home office in the inner Melbourne suburb of Albert Park last weekend, I could barely hear myself think over the mosquito drone of the racing cars in the Grand Prix – it also reminded me that the end of financial year is approaching, and that means tax time. 

The end of March, after the third quarter BAS reporting, is a good time to bring your records up to date. You should be able to see if you are in a good tax position or staring down a hefty payment that could cripple your cash flow for months.

While a trip to the accountant is on a par with a trip to the dentist, it’s better in both cases to get on to it before the pain gets unbearable. Call your accountant now for a time after Easter as they may have time for you before the end of year rush.

There are tax advantages to working from home. Here are some ideas to help you save on tax and to cut down the time you will have to spend (the meter ticks over quite unmercifully) with the accountant:

  • Decide if you will lodge the business activities as part of your personal tax return or a separate business structure that will make its own income tax return. If it’s part of your personal tax it may be time to think about setting up something more formal if your growth warrants it.
  • Get your tax registrations in order – PAYG – pay-as-you-go, GST – goods and services tax, FBT– fringe benefits tax, ABN – Australian business number, TFN – tax file number.
  • Make sure you have adequate provisions for the PAYG salary payments for staff and yourself.
  • Know what you can and can’t claim as tax deductions. There are three categories of home-based businesses for tax-deductible expense purposes:
    1. You run your business from home – the home is a “place of business”.
    2. You have a business work area in the home, where the business is run separately from living areas – home office/study.
    3. You work from home, but do not have a work area set aside for business activities.
    Keep in mind that if you are in category 1 and you run your business from home, you home is a place of business, which has longer term CGT implications for when you next sell your home. That is, if you claim 20% of rates and other expenses, the sale of your home could be subject to 20% CGT.
  • Talk to your accountant to make sure you are making the most of what you can claim, including:
    • Rent or home loan interest.
    • Gas and electricity.
    • Telephone.
    • Depreciation of equipment – computers, desks and chairs.
    • Insurance.
    • Rates.
    • Motor vehicle expenses.

Remember, if things get tough as the economy slows down, talk to your accountant who can contact the tax office on your behalf about payments over time to help you through a rough patch.


Dr Jane Shelton not only runs a business from home but is doing business research into people working from home. She is managing director of Marshall Place Associates, Melbourne’s independent think tank, and CEO (honourary) for ‘Life. Be in it.’ International. Shelton has a Doctorate in Business Administration at the Australian Graduate School of Entrepreneurship (AGSE) at Swinburne University of Technology after a Master of Arts in Public Policy at Melbourne University and a Bachelor of Business in banking and finance at Monash University. She is the author of the book “No Workplace Like Home”.

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