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If You Have A Home Office, You Can Claim These Expenses On Tax

Working from home saves cash, but there are ways to save even more.

04/07/2016 3:01 PM AEST | Updated 15/07/2016 12:54 PM AEST
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Need a new lamp? Maybe a guard dog?

So you're keeping your overheads low by running your business from home and saving loads of cash on office space, commuting and expensive lunches from the food court.

It's a smart move -- but there are ways you can save even more. It's all about knowing what you can claim at tax time.

But not everyone is a deductions whiz, with new research from cloud accounting firm Xero showing 40 per cent of small business owners were fuzzy about what expenses qualified for tax breaks.

The second annual Xero EOFY Survey, which surveyed 503 Australian small business owners, found 45 percent put off doing their taxes, and one in five business put the delay down to stress over the process.

Henrik Sorensen
Many small business owners do this when it comes to tax. We hear you.

Accountant and Director of eTaxGlobal, Nicholas Garland, said it's no surprise that small business owners avoided tax.

"I think people think of tax as being nasty so they put it off as much as they possibly can," he told The Huffington Post Australia. "Even when they have an accountant it's the last thing they want to think about."

So, to make things easier as EOFY rapidly approaches, here are Garland's top tips to what you can claim for your home office.

Light, power, action!

When you work from home any of your household running expenses -- gas, electricity, water -- can be claimed. But there's a catch. As your office is also your home you need to calculate the percentage of space that you use for business -- usually just your work room or study -- by using a floorplan of your home. If it's say, 25 percent, then that's the amount of each bill you can claim.

Zsolt Nyulaszi
Work out how much of your home you actually use for work via a floorplan, then use that percentage when claiming bills and rent.

Even though you use your kitchen and bathroom during your work hours, Garland says you can't claim them.

"The rule is based on a specific area that is used for work," he said. "If you have a shared space the Australian Tax Office (ATO) would deem that as primarily a personal space. So you can't claim your bathroom or kitchen or the third bedroom even if no one is living in it. "

Save on your communication

For your home phone, mobile and internet, you'll need to apportion the amount you spend on personal vs business.

"There are a few ways to do it," Garland said. "In terms of the home phone, if it's a business line you can claim 100 percent. If it's a home phone and it is used for both business and personal you can claim a portion of that and it's based on a log or a guestimate."

The same rules apply for your internet service as well as your mobile.

Szepy
Using your mobile and home internet for work? You'll need to calculate how much is for texting friends and Netflix, and how much is for your business.

Vroom vroom!

If you need to travel from your home office for work you can claim those expenses -- including mileage, freeway tolls as well as car insurance.

"If you travel less than 5000km during the year you are not required to keep receipts but must be able to provide a basis for this travel," Garland said. "If you travel greater than 5000km during the year then keep a logbook for three months and all your receipts for fuel, car washing, repairs, registration and insurance."

Home office beautiful

You can claim depreciation on desks, chairs, computers, LCD screens, lamps, curtains, carpets and light fittings for the rooms from which you conduct business.

"The cost of purchasing those items is either written off immediately depending on the amount or depreciated, and it's 100 percent because it's only used for work," Garland said.

If you use that room for any other personal use, then you need to work out the percentages. You can also claim depreciation on any furniture or fittings that you previously had, but you need to show the ATO proof of purchase.

Getty Images/iStockphoto
Bought new office furniture and a computer for your home office? You can claim it all.

Home sweet home payments

You can claim your rent or your mortgage payments as small business expenses, but it's a tad complicated.

The ATO classifies working from home as either a home office or a place of business.

"Anyone who is employed and then works at home after hours is classified as a home office, not a place of business," Garland said. "But If you are a contractor and you're not employed by anyone and your home office is your primary office then that can be your place of business."

If your office is the former, you cannot claim rent or your mortgage, but you can if you're the latter.

If you are renting, work out the percentage you can claim as per your utility bills above.

Many small business owners choose not to claim their mortgage payments as they may be liable for capital gains tax when they sell their home.

Garland advised against it, too.

"You'll make so much more money by not having to pay capital gains tax on the sale of your house in the future than you are by claiming mortgage repayment," he said.

There are also several deductions that may surprise you, like a guard dog, but it's always best to check with your accountant first.

The ATO also has a very cool -- in tax terms -- app that can help small businesses keep on track of their tax commitments and deductions.

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