Are you operating your business from your home? If yes, then you may be eligible for possible deductions for your home-based business expenses. The ATO provides guidelines for claiming deductions on expenses that are incurred when you run your business from the comfort of your home. However, first, you need to understand what a home-based business structure involves.

A home-based business refers to a business run from a residential property. It allows businessmen to take benefits of working from home while reaching their entrepreneurial dreams. One of the benefits of a home-based structure is the flexibility it provides as you can set your own work schedule and save money and time by removing the need for a separate office space. In addition to this, based on your business activities, you may claim various deductions on your home-based business expenses as mentioned by the ATO.

What is a Home-Based Business?

A home-based business is one where a portion of a home is reserved and used as a place of business. The types of expenses you can claim will be based on how you run your business from your home and the business structure. You are allowed to claim only those deductions for the business portion of your expenses.

If you don’t have a portion reserved and used as a place of business but you work from home, you may be able to claim a deduction for some of your expenses related to the space you use. Be aware that you may have to pay CGT when you sell your home if you utilised a portion of your home for business purposes. Don’t forget to maintain the right records to check out your deductions or CGT. If you qualify, you may be able to minimise your CGT by applying the small business CGT concessions.

Home-Based Business Expenses

If you run some or all of your business from home, you may be able to claim tax deductions for the business part of expenses. These may include:

  • occupancy expenses (such as house insurance premiums, council rates, mortgage interest or rent, and land taxes)
  • running expenses (such as a decline in plant and equipment value, phone, cleaning, electricity, furniture and furnishing repairs)
  • the expenses of motor vehicle trips between your home and other places, if the travel is for the purpose of business.

You may not be allowed to claim occupancy expenses if PSI rules apply to your business. If you have a space in your home as a place of business, you will be able to claim running expenses and occupancy expenses. Moreover, you can seek help from a tax accountant in Melbourne to know what you can claim for home-based business expenses.

Don’t forget that if your business is liable to GST input tax credits, you need to claim the deduction in your income tax return at the GST-exclusive amount. You may be eligible to claim a deduction or an accelerated rate of decline in value for depreciating assets under one of the tax depreciating incentives. Recent changes have been made to the methods to calculate running expenses. On 30 June 2022, the temporary shortcut method ended. Best small business accountants in Melbourne know everything about new changes in the Australian tax system, so you can hire them.

For the 2022-23 income year, you can use the revised fixed rate method to make calculations for your running expenses which is a fixed rate of 67 cents per work hour and include the following usage expenses:

  • internet
  • phone
  • stationery
  • gas
  • electricity
  • computer consumables

Find Your Business Structure

One of the first things you need to decide is to find your business structure. Choose your business structure and business type that comes with liability limitations, tax implications, and operating obligations. The structure of a business will have a significant impact on how you operate your business and what you need to do to be legally compliant. There are 3 main business structures:

  • Sole trader
  • Partnership
  • Company


The blog highlights home-based business structure along with home-based business expenses. Therefore, make sure you know your business structure and the type of business expenses you can claim. For more details regarding possible deductions for home-based business expenses, you can get in touch with Reliable Melbourne Accountants.

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