Small Business Tax Deductions for Home-Based Businesses

Tax deductions relate to expenses paid from your pocket to run your business or complete workplace duties. The Australian Office outlines eligible costs that can reduce your assessable income, minimising your final tax bill. 

As a home-based business owner, you’re more likely to invest more of your personal finances into performing your role. For instance, your energy bill will encompass personal use and electricity used to power your computer, printer, and other devices. 

Taking advantage of tax deductions can maximise your finances, allowing you to expand crucial elements of your business. Read on as we summarise the key deductions for home-based businesses you need to know about before June 30th


4 Deductions for Home-Based Businesses

A home-based business operates primarily from home, unlike an external workplace like an office or warehouse. Review four expenses you can claim on your tax return below:


Occupancy Expenses

According to the ATO in 2023, You can claim occupancy costs, such as the following:  

  • Rent
  • Mortgage bills
  • Land taxes
  • Council rates
  • Home insurance

Calculate the deductible by measuring the area of your home dedicated to work in square metres. You then compare that area to your home’s total area. Here’s a calculation you can use:

  • House (2 floors): 186 square metres = 100%
  • Home office: 8 square metres = 
  • Rent: $1,200

You can use the formula: 100% (186 sqm) – 8 sqm = 92% divided 100 = 0.92 X $1200 = $1,104. Here, the deduction would be ($1200 – $1,104) $96. 


Utility Bills

Running expenses usually encompasses utility bills, including:

  • Electricity
  • Mobile phone bill
  • Furniture
  • Repairs on furniture
  • Internet

If you don’t have a dedicated work area, you might be unable to deduct occupancy and running expenses simultaneously. For items with dual purpose (personal and professional), you must calculate the usage and take that percentage from the price you paid. 


Business Transport

Vehicle expenses cover the fuel spent on travelling to the following locations is claimable:

  • Visiting clients’ premises to deliver or provide goods and services
  • Retailers or vendors for supplies
  • Bank for business banking purposes, like depositing cash
  • Attend financial appointments with tax agents and advisors
  • Post office to send work-related documents and items like invoices or goods


Work Equipment

Work equipment like printers and accessories like ink and paper are deductible. You can claim on work-related equipment, such as computerised electronic devices. 


What Deductions Can’t You Claim?

You cannot claim refreshments like food, tea, and coffee. Personal expenses aren’t applicable either. For example, if you purchased a printer but only used it for personal documents, you cannot claim the cost of that device. 

You can’t claim further deductions on the above expenses if you receive the 0.67 cents per hour through the Fixed Rate Method. 

You may be subject to capital gains tax if you sell the house where you worked. You may not deduct this tax but could be eligible for small business CGT concessions. Ensure you maintain your tax and financial records to apply this initiative. 


Speak to Our Certified Accountants

Let’s tackle your tax return together to ensure you optimise your annual savings. Contact us to see how our certified accountants and advisors can best support you.

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