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  • #970226
    gerrycircus
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    Hi there

    I’m new to the freelance game, and have about 6 1/2 years experience. So far so good – and I’m REALLY enjoying it.

    I have a question – my other half is looking at moving from our apartment. We’re in Sydney and in a 2 bed-apartment and I use one bed room as an office. We’re looking at renting a house, and am wondering out the feasibility of placing some of our rent against my tax at the end of the year. The rent will be a $600 more than we are paying now so it would be of great help. Also I will be using the house during the day to entertain clients, etc. Is there any possibility that the purchase of furniture would be applicable to place against my taxable income?

    Thoughts?

    Many thanks in advance,

    Gerry

    #1043229
    Serena Star Leonard
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    Hi Gerry,

    I am not an accountant, so please please double check this!

    From my understanding if you have a specific room for your home office, that is used exclusively for that purpose then you can claim a proportional amount of your rent by square meter. Likewise with utiliy bills etc.

    Also for your business you can claim against furniture and other office requirements that are bought for use in your business.

    Good luck with the freelancing! You will love the lifestyle!

    Cheers,
    Serena : )

    #1043230
    gerrycircus
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    Awesome – that’s exactly what I thought as well.

    Thanks for your help Serena. Really appreciate it.

    #1043231
    imagewerx
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    In Australia we have a self assessment system for income tax purposes so you can claim anything you want. The question is whether you can substantiate the claim and whether or not the ATO will accept it.

    If you have a specific room set aside as an office and it is used only for business purposes then that would likely be accepted. Likewise with office furniture and equipment.

    However I would be very careful claiming capex and depreciation on furniture that was purchased essentially for private use even if used at times for business purposes.

    As a guide the ATO guidlines suggest a sum of 0.26 per hour for home/work expenses covering electricity/depreciation etc.

    #1043232
    The Copy Chick
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    Serena Star Leonard, post: 52547 wrote:
    From my understanding if you have a specific room for your home office, that is used exclusively for that purpose then you can claim a proportional amount of your rent by square meter. Likewise with utiliy bills etc.

    This is from the ATO Home-based Business Booklet provided to me by an ATO field officer. It cover interest on mortgage payments, but I imagine the same rules would apply to rent (although you may need to confirm that).

    Interest Deductibility Test:

    To claim a deduction for part of the interest you pay on money you borrowed to buy your home, the area you have set aside must have the character of a place of business – for example, a hairdresser’s home salon, a caterer’s home kitchen or a photographer’s home studio. While this will depend on your particular circumstances, an area of your home is likely to have the character of a place of business if it is:

    – Clearly identifiable as a place of business – for example, you have a sign identifying your business at the front of your house;

    – Unsuitable for private or domestic purposes;

    – Used exclusively or almost exclusively for carrying on your business;

    – Used regularly by your clients.


    Based on the above, I would have thought my home office qualified – it is set up purely as an office, I am in here from 9-5 for work purposes only, and I have client meetings in the office.

    The ATO field officer did not feel my office passed the deductibility test as it does not have an entry separate from the rest of the house – you have to come through my front door. Nor do I have signage, although I am considering having a sandwich board made up that I can put out the front as necessary.

    Also, if you own (or are paying off) your home, you will need to pay CGT on the portion you claimed as an office expense should you later sell the home.

    If in doubt, call the ATO and arrange for a field officer to come an view your premises or discuss the matter with you. It’s a free, confidential service and you’ll be given a direct contact number for the field officer you see, should you have any more queries down the track.

    Cheers,
    Anna

    #1043233
    WWDesign
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    Hi Gerry,

    I do the square metre thing for my office at home, as other people have mentioned.

    I also keep a log book of phone calls so I can charge a percentage of home phone costs to the business.

    I also keep a log book of travel and then using the cents per kilometre method for my car.
    http://www.ato.gov.au/individuals/content.asp?doc=/Content/33874.htm

    My philosophy is if I spend anything I question whether it can be tied in whole or part to the business. As imagewerx said, it is a self assessment system, if I feel comfortable claiming it and am willing to defend that claim I go ahead.

    The ATO website is a wealth of info.

    Cheers

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