Claiming Home-Based Business Expenses
- anytimeassist
- Jan 6
- 3 min read
Updated: Jan 21
If you run your business from home, you may be able to claim a portion of your household expenses as tax deductions. What you can claim depends on how your business operates from your home and how you use the space.
The key rule is simple:You can only claim the business-related portion of your expenses, and you must be able to show how you worked it out.
Types of Home-Based Business Expenses
There are two main categories of expenses for home-based businesses:
Running expenses
Running expenses are the additional costs of using your home to operate your business. These may include:
Heating, cooling and lighting
Cleaning costs
Phone and internet usage
Depreciation and repairs to business equipment, furniture and furnishings
You can claim running expenses even if your business is run from a shared area of your home, such as a desk in a living room.
Occupancy expenses
Occupancy expenses relate to the ownership or rental of your home, such as:
Rent or mortgage interest
Council rates
Land tax
Home insurance
You can only claim occupancy expenses if part of your home is a dedicated place of business, meaning it is:
Clearly identifiable as a business area
Not easily used for private purposes
Used almost exclusively for business
Regularly used for client visits
If you’re eligible to claim occupancy expenses, you can also claim running expenses.
How to Calculate your Claim
You can choose the method that best suits your circumstances, provided it’s reasonable and supported by records.
Common methods include:
Fixed rate method – 70 cents per hour for each hour worked from home
Actual cost method – claiming the actual costs you incur as a result of working for your business from home
Floor area method – used when you have a dedicated place of business
If you use the fixed rate method, you must keep a record of all hours worked from home for the year.
Business Structure Matters
Your business structure affects what you can claim:
Sole traders and partnerships can generally claim running expenses, and sometimes occupancy expenses
Companies and trusts usually require a genuine, market-rate rental agreement
If you earn personal services income (PSI), your ability to claim some occupancy expenses may be limited
There may also be fringe benefits tax (FBT) or Division 7A implications in some situations.
Capital Gains Tax and GST
If you claim occupancy expenses or earn rental income from your business, there may be capital gains tax (CGT) implications when you sell your home.
Record Keeping is Essential
You must keep records for at least five years, including:
Receipts and invoices
Utility bills
Depreciation records
Floor area calculations or time-based diaries
Rental agreements (if applicable)
Good records give you flexibility to choose the most suitable method and support your claim if reviewed.
More Information
Home-based business expenses can provide valuable deductions when claimed correctly, but the rules depend on how your business operates from home and how your space is used. With the right records and approach, claiming these expenses can be straightforward and compliant.
If you’d like help understanding what you can claim, choosing the right calculation method, or keeping your records in order, contact Jess at Anytime Assist for personalised bookkeeping support.
Disclaimer:
This information is general in nature and has been provided for informational purposes only. It does not take into account your personal circumstances. You should seek advice from a registered tax or accounting professional before acting on this information.
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