The Australian Tax Office allows Australians who work at or from their home to claim a deduction for the additional expenses they incur from running their business.
Generally speaking, the deductible expenses that can be claimed are divided into two categories; occupancy expenses and running expenses.
Occupancy expenses: relate to ‘the place of business’, i.e. where part of an individual’s home is used solely for income producing activities. Examples of occupancy expenses include:
- mortgage interest
- rental costs
To be eligible to claim a deduction for an occupancy expense, the area of the home used for business activities must have the ‘character of a place of business’. The ATO has stated that the following shows an area of a home is ‘a place of business’ where:
- the area is clearly identifiable as a place of business
- the area is not suitable for private or domestic use
- the area is used exclusively for carrying on a business
- the area is used regularly for visiting customers
Running expenses: are costs that relate to the use of facilities in the home to run the business, such as:
- the cost of electricity and gas to heat, cool or light up a room
- business phone costs
- the decline in value of plant and equipment, such as chairs, bookcases and computers
- the decline in value of furniture and furnishings, such as curtains and carpets
- the cost of repairs to furniture and furnishings
- cleaning costs
Individuals can only claim a tax deduction for the amount of running expenses’ usage from the business, not general household expenses.