Working from home is great, especially if you own a small business because it can help to keep overheads low. There are a number of savings you can make when it comes to tax time – provided you know what to claim. According to research done by Xero, more than 40% of small business owners are unsure about what exactly it is they can claim when it comes to expenses.
We’ve put together a bit of a list of things you can claim if you haven’t started putting your tax return together yet.
Office fit outs
It is possible to claim depreciation on almost everything in the room you conduct business from. This includes chairs, desks, computers, screens, carpets, curtains, light fittings and lamps. Depending on the cost of each item, they are either classified as an immediate write off or they will be depreciated. If this room is used exclusively for work purposes you can claim 100% of the expenses, however, if you use the room for any personal reasons, you will be required to work out what percentage you use for business and that will be the percentage of each expense you can claim. With any expense, you must be able to provide the ATO with proof of purchase (ie, receipts) upon request.
Similar to your utility bills, you can claim your internet and phone bills based on what percentage of each is used for business.
Electricity and utilities
When you work from home, you are able to claim any utilities such as gas, electricity and water, however, you can only claim based on the percentage of floor space you use to conduct your business. For example, if your home office takes up 15% of your floor plan, you can claim 15% of each bill. This only applies to spaces used exclusively for work so shared spaces like your kitchen and bathroom cannot be claimed.
If you are required to travel from your office at home to somewhere for business purposes, you can claim a whole range of expenses related to the maintenance and running of your car including fuel, tolls and car insurance.
You can claim up to 5000km per year without the need to keep receipts, but keep in mind that you will still need to be able to prove that you had a reason to travel. If you are trying to claim more than 5000km a year, you will need to keep a log book for at least 3 months and all receipts, including for fuel, rego, insurance and car washing.
Payments on your home
Depending on what circumstances you are working from home under, you may be able to claim your rent and mortgage repayments. The ATO has two classifications for people working at home: home offices or a place of business. If you are employed and then work from home after hours, it will be classified as a home office. If, however, you are a contractor and not employed by anyone, your home is considered your primary office and therefore is classified as your place of business. This means you are able to claim your rent or mortgage using the same percentage method you would use for your utility bills. If you are planning to claim your mortgage repayments, be aware that this can mean you will have to pay capital gains tax on your house should you choose to sell it in the future. In most cases, this will not work in your favour. This is why it is so important that you talk to a certified accountant. Get in contact with BIS Cosgrove today and let us look after the frustrating tax return process. We can also work out other deductions you may be eligible for – some which may surprise you such as having a guard dog!