A surge in commercial rental property increases during 2017/2018 has caused business owners and employers to look at various space saving options like relocating the office to home or giving employees “work from home” days.

The advantages of a home based office include reduced costs, tax savings, being able to work in your slippers, be home for sick kids and no commuting to the office.

The disadvantages of a home based office may include family interruptions, loneliness and restrictions for business growth.

To provide a home-based office with an avenue for growth and a professional meeting place you could consider complimenting it with a business centre and outsourcing.

For a city office, if you want the flexibility of a home office or want to resist the move to a bigger city office - introduce “work from home” days, outsource or use the home for storage.

The ATO and Home Based business

The ATO has recently updated their guidance on tax deductions for home office expenses. The ATO now distinguishes between a home- based business versus a home office around the notion of “principal work place”.

Home Based Business

Your home office is a home- based business if you carry out most of the business work from home or you don’t own or rent any other work premises other than your home.

If your home is also your place of business, you can claim income tax deductions for a portion of both the Occupancy costs and the Running costs of owning, maintaining and using your home for this purpose.

Occupancy costs include interest or rent, rates and house insurance premiums.

Running costs relate to the use of the facilities within the home, including electricity, office furniture and cleaning.

You will also be able to claim more motor vehicle expenses as there will be a higher business use % of your motor vehicle given there will be no private trips between work and home.  

BUT if you own your home and then sell your home you may be liable for some capital gains tax. It will be important to keep records of any renovations, repairs and maintenance and rates, time frames when the home was being occupied as an office and the % area of the home being used as an office.

Employees using a Home Office

More commonly, tax payers will have a home office, which is not their principal workplace. For a home office, taxpayers can only claim deductions for running expenses. Interestingly, TR 93/30 refers to “home offices” being used as a matter of convenience. For many employees they are required to work from home either to deal with international time zones, to work overtime or “work from home days” to address increasing costs of commercial rents. So, despite this requirement to work from home, the ATO will still only allow a deduction for running costs because the home office is not a principal place of business.

Tax payers claiming running costs can use either the actual receipt method with % business use floor area or can use the cents per hour method. For 2018 the fixed rate is 45c per hour for heating, cooling, lighting and furniture depreciation.


By Amanda Rogers