whats constitues a home office being a business office?

[keepsmiling]

i am claiming 50% of my rent as i have a home office where couriers and customers come and drop off flyers and brochures for me to distribute.I also collearate this material so use alot of floor space-my accountant is stating that this may not be claim i can do? any reason why?

[Burgo]

If you own your house or paying it off it may not be wise to claim a tax deduction for the space used. When you go to sell your house down the track the area could be subject to capital gains tax.

however I could be wrong.

[Astrid]

Hi

As far as I know you can only claim your actual office room (%/sqm of overall house).

[BrightBiz]

I've just been looking into this as I'm starting to pick up a few more clients and was looking at the benefits of leasing a small office space vs dedicating a full area at home.

I'm with Astrid in that you can only claim the % of floor space, and also that it must be a dedicated business area in the home from my understanding. You can claim only the percentage of internet, electricity etc based on that floor area and the percentage your business would use.

I would suggest talking to an accountant to help figure that out, as I grow my business I'm about to do just that to sort it out from the start

[ray_223]

Originally Posted by BrightBiz

You can claim only the percentage of internet, electricity etc based on that floor area and the percentage your business would use.

I would suggest talking to an accountant to help figure that out, as I grow my business I'm about to do just that to sort it out from the start

My accountant makes us keep a log of phone calls, computer use and internet use for 1 month (i.e. log business use vs personal use).
I don't believe these things can be worked out based on floor space.
(I'd love to be proven wrong because it's a major pain)

[FletcherTax]

Hi All

The following link from the ATO helps answer this more clearly http://www.ato.gov.au/businesses/con...&mfp=&st=&cy=1

But overall, whatever method you use to claim you must be able to justify it. Doesn't have to be floor space % only. As long as you can justify/explain what your claiming and why you've picked the proportion/allocation you have.

A lot of accountants advise not to claim anything but occupancy expenses such as electricity and internet (apportioned) due to Capital Gains consequences later down the track.

Fletcher Tax Accountants
www.fletchertaxaccountants.com.au

[Astrid]

A lot of accountants advise not to claim anything but occupancy expenses such as electricity and internet (apportioned) due to Capital Gains consequences later down the track.

But that's only when you own, not rent, isn't it?

My rooms are all square so it was easy to calculate the sqm

[FletcherTax]

Yes, for when you own as opposed to rent.

[not the tax man]

As to "Whats constitutes a home office being a business office?"

The answer is in two parts ... firstly it has to be "the" place of business and not merely a study where you bring work home from the "real" office and secondly, it needs to have the character of a place of business and not be readily adaptable for private use.

Furthermore, the discussion tangents so I take the opportunity to address certain misconceptions apparent.

A place of business in a home may have its associated "Occupancy Expenses" claimed. These are inherent to the property regardless of any business operation so let's be clear that things like electricity are NOT occupancy expenses but rather RUNNING expenses i.e the additional costs of running the business. Occupancy expenses are mortgage interest or rent, council and water rates and building insurance and for my clients, building depreciation as well.

The most common method of apportionment is floor space but time is also easily enough calculated under the right circumstances.

As to CGT consequences, these will apply regardless of what you do or don't claim - just google "interest deductibility test" (it's an ATO thing) to see what I mean.

Best of luck and if you need further info or assistance, please feel free to contact me.

Regards
Frank
http://www.deductyourhome.com.au