Home – New Forums Money matters Will renting a coworking space prevent me from capital gains tax on my home (mobile sole trader)

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  • #997775
    Soletradernewbie
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    Im looking to start operating as a mobile sole trader. My services will be provided in clients homes.

    If I rent a coworking space (with or without a virtual address option), is this considered by the ATO to be an office and therefore my primary residence is no longer subject to capital gains tax at sale?

    I know the coworking space is deductible, but I want to have confirmation that my home is no longer involved (I have no intention of claiming any deductions for working at home).

    Thanks!

    #1213904
    Soletradernewbie
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    The ATO website doesnt specify what a rented premises looks like in the following scenario:

    What is a home-based business?

    A home-based business is one where you operate the business including:

    • from home – that is, the business does not own or rent any premises other than your home, for example, a tiler who does most of their work on clients’ premises but does not have any other business premises.
    #1213905
    Dave Gillen – Former FS Concierge
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    Welcome to the forums [USER=104971]@Soletradernewbie[/USER]!

    Can you clarify (or link to) which capital gains rule you’re worried about? We do have some tax experts on here often, so hopefully they can set you straight.

    Great to have you here. :)
    Dave

    #1213906
    Soletradernewbie
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    I don’t want my home to be considered my place of business as I’ll not operate out of it at all. But the address will be my home if I don’t have access to a virtual business address through the coworking space I intend to use. Are co-working spaces considered sufficient business premises to avoid my home being pulled into the capital gains issue.

    https://www.ato.gov.au/General/Property/Property-used-in-running-a-business/Running-your-business-from-home/

    Capital g
    ains and the main residence exemption
    Generally, you can ignore a capital gain or loss you make when you sell your home or main residence (under the main residence exemption).

    However, you don’t get the full main residence exemption if your home is your principal place of business, although you’re probably entitled to a partial exemption.

    To work out the capital gain that is not exempt, you need to take into account a number of factors including:

    #1213907
    Ross Forrester
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    Hi.

    If your home is a business premises you will lose the main residence exemption when you sell your home.

    Simply renting an office will not change the fact that your home is a business premises.

    Not many people do actually have a business premises from their house. A petrol station in a country town is a good example – petrol station at the front and the house at the back. Or a doctors surgery that was once an old home – it has a reception desk, his and her toilets and walls are knocked down.

    If you are simply doing book work from a bedroom the nature of that bedroom is not a business premises – so you will not lose the main residence exemption by that alone.

    Hope this helps.

    #1213908
    Soletradernewbie
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    Thanks Ross. Do you happen to know how the ATO distinguishes that my home address (which is the only address I can put for the mobile business at this moment) is not used for the business and I’m using another space?

    I’ll have paperwork to support I rent an alternate coworking space (not a commercial lease in my name) and no claims for deductions related to the primary residence, but I fear that may not be satisfactory when I sell my house.

    #1213909
    Micky P
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    I’m going to caveat this reply with a “You should ask the ATO”

    But, my wife had our home address listed as the business location.
    All business related correspondence was sent there, but she never claimed a specific area for business and as such CGT was not an issue.

    She was also able to still claim a small portion of gas/electricity. As the work she needed to do at home, was on a laptop, in the lounge room, in front of the TV. As this area was not put aside for specific business purposes, the ATO had no issue.

    When you have a room set aside for an office or business related work, or you start claiming deductions for mortgage, house insurance, depreciation on house hold furniture, cleaning or depreciation on curtains, carpet, that is when CGT comes in to play.

    #1213910
    Ross Forrester
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    Soletradernewbie, post: 256070, member: 104971 wrote:
    Thanks Ross. Do you happen to know how the ATO distinguishes that my home address (which is the only address I can put for the mobile business at this moment) is not used for the business and I’m using another space?

    I’ll have paperwork to support I rent an alternate coworking space (not a commercial lease in my name) and no claims for deductions related to the primary residence, but I fear that may not be satisfactory when I sell my house.
    Hello.

    The area needs to be quite distinctive as a business to become a place of business. If you are using part of your home as a place of business and you can convert it back to a normal home in (say) under 24 hours (move a bit of partitioning, a desk and the like) you are not using your home as a place of business.

    The capital gains tax law relating to your main residence exemption is not connected to how much you have claimed on shire rates, interest and the like. It is a separate area of the law. So simply saying “I have made a claim for ongoing costs here so the main residence does not apply” does not, by itself, work.

    You are required to make a decision based on your facts.

    If you have a business from home it is more likely to be a place of business if:

    • (i) it is clearly identifiable as a place of business – so external signage is a good indicator.
    • (ii) it is not readily suitable for adaptable or private or domestic use in association with the home generally – so significant structural changes to the home that prevent it to be readily altered back into residential use have been undertaken. It might be that built-in furniture with connected electricity needs to be moved.
    • (iii) it is used exclusively or almost exclusively for the carrying on of a business, or
    • (iv) it is used regularly for visits of clients or customers. (TR 93/30).

    Simply writing down your home as the business address in the tax return is irrelevant. You distinguish if the home is a place of business and you do that based on your facts. If the ATO then do a review you are then required to support your decision based on your facts that you can evidence.

    One of my clients is an architect. And the home office has a seperate entrance and their is seperate client parking that is not connected to his own family parking. And the front area of the house is clearly marked for clients so they know how to enter.

    If your place of business is physically separate from your home I think you have a good argument that the office is fully deductible.

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