Talking Cents

Your small business accountant lets you know what you can claim from home office expenses

Everyone's heard of claiming home office expenses but few understand exactly what can and cannot be claimed. Getting it wrong can have major ramifications. So today let's run through a few basic points to allow you, as a small business owner, to get a better grasp on just what you are entitled to claim. No taxpayer should be paying any more tax than they are legally obliged to and understanding home office expenses will prevent overpaying the ATO just a small amount of your hard earned dollars. Home office expenses falls into two broad categories.

1. Running Expenses
Running expenses for your work related area at home consist of light and power, telephone/internet expenses (both home and mobile), repairs and cleaning to the home office area. These expenses can be claimed if you do part of your work from home, even if the part of your home being used is not a dedicated work area. The way to claim these expenses is to apportion the amount of your home used for work purposes, a home study may be anything from 5% to 10% of your floor space, and then use that percentage to work out your home office expenses.

2. Occupancy Expenses.
Occupancy expenses relate to your home ownership and consist of rent or mortgage interest, home insurance and council rates. These expenses can only be claimed if you do not have a normal place of work, and your home, whether owned or rented, is your basis for your employment. In most cases, if you are an employee and work for a business these expenses will not apply to your situation. Be on the alert before claiming occupancy expenses. Doing so can result in losing the primary residence capital gains tax exemption. This is a more detailed area that would require a much more in depth discussion of your personal circumstances.

Other points to note:
· Capital items such as computers, study furniture and mobile devices such as ipads can all be claimed as depreciable items. Again, if used partly for work and partly for home a fair split between the two must be made. Be careful not just to claim the whole expense.
· If all of the above has still left you a little perplexed the ATO has simplified the matter for you and allows a calculation of 34 cents per hour worked at home for running expenses. All you need to do is keep a diary for four consecutive weeks and apply that across the full income tax year.

If this blog raises any further queries mas accountants as your small business accountant is, as always, only too happy to discuss the issue as it applies to your personal circumstances at our office or yours.