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:
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
Individuals can only claim a tax deduction for the amount of running expenses’ usage from the business, not general household expenses.