Record Keeping for Small Business
A home based business is when you operate a business at or from home.
These businesses can include many types such as dentists, hairdressers, restaurants ….. tradies……financial adviors, accountants and even security services.
Why work from home?
One obvious reason is that you don’t need to pay rent. This potentially saves the business owner thousands of dollars every year.
Another reason is for convience. In some cases, children can be close at hand while the business can still run successfully, saving money on daycare expenses and it gives flexiability that a family may need.
Some of your expenses you incurr such as electricity, computer,phone and running expenses can potentially become tax deductable for your business.
| Deductions you may be able to claim | You do have a work area | You don’t have a work area |
| Cost of using a room’s utilities such as gas and electricity | Yes | Yes |
| Work-related phone costs | Yes | Yes |
| Decline in value (depreciation) of office plant and equipment such as desks, chairs and computers | Yes | Yes |
| Decline in value (depreciation) of curtains, carpets and light fittings | Yes | No |
| Occupancy expenses such as rent, mortgage interest, insurance and rates | No | No |
If you buy tools, equipment and other assets that help you earn an income,you can claim a deducation for all or part of the cost. When tools are used for both private and business you can apportion part of the expense to business only. When a computer is used for both private and personal uses this rule also applies.
Capital Gains Tax
Generally CGT is not paid on an owner occupied home. However, if you run a business from home, and have claimed expenses, CGT may apply. To satisfy the interest deductabilty test you may have to pay Capital Gains Tax when you sell your home.
Capital Gains Tax will not apply:
- If you operate a busness from a rented home
- You do not have an area set aside for the business
- You operate your business through a company or trust
Tax Basis For Small Business
The ATO have recorded webinars which can be accessed by a smart phone or computer which you can access on tax basics for small business.
About the author
Veronica Trethewey is the Director of BookSenz Pty Ltd with over 30 years experience in bookkeeping and administration. She has helped a large number of Western Australian businesses with managing their finances.
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