Working From Home Expenses & Mortgage

Gerbud on 04/07/2018 - 17:46
Last edited 04/07/2018 - 17:52

Hi all,

I run my own business full time from home. Myself and my partner bought the property a year back. Prior this we rented and I claimed expenses like rent, electricity, internet etc.

I have been told that when you own a property, this is different in terms of tax when renting.

Was wondering is anyone on here in a similar position to me and if they claim expenses or not?

As far as I am aware, I can claim but any profits made on the property if sold are liable for tax? I could be wrong.

Look forward to any advice.

Thanks

Financial

Comments

  • retiredfeline on 04/07/2018 - 17:49
    +6

    Surprise, ATO has a page on this: https://www.ato.gov.au/General/Property/Your-home/Working-fr…

    • HighAndDry on 05/07/2018 - 10:04

      OP should be careful though. If they live in it, they'd be entitled to CGT discounts after a certain period. Classifying part of the property as a home office - by claiming it - makes it no longer 100% residential and can affect those CGT benefits.

  • mysterytal on 04/07/2018 - 18:13
    -1

    You could claim a portion of the mortgage interest but I wouldn't as you've said it could expose you to capital gains tax.

    Claim a portion of everything else. You could divide the expenses by floor area and/or time in use.

    • hassy150305 on 04/07/2018 - 23:37

      If your eligible to claim, You should claim:
      "If you satisfy the interest deductibility test, you must account for any capital gain you make when you sell your home. You may satisfy the interest deductibility test even if you did not:

      • borrow money to buy your home; you must apply the test on the assumption that you did borrow money to buy the home
      • claim mortgage interest as a deduction."

      https://www.ato.gov.au/business/income-and-deductions-for-bu…

    • HighAndDry on 05/07/2018 - 10:05

      Don't know why you're being downvoted. This could have pretty significant CGT implications for OP. It's not as black and white as "definitely don't claim", but in most cases it'd lean heavily in that direction.

      • mysterytal on 05/07/2018 - 10:16

        No idea. I don't claim any of the housing expenses listed in the link. No mortgage interest, no council rates and no buildings insurance.

        To avoid any confusion. The space I use at home for my business that I run 100% from home can also be used as a bedroom…a room that is also domestic in nature. It's not a business only space.

        I claim the additional cost of electricity to run the lights in the room, a little for gas to run the heating or electricity to run the air conditioner for the time that it's used, the cost of electricity to run the computer, the cost of the computer itself-I use a different computer for personal use so I can claim 100% of it's cost, the mobile phone costs - I have 2 SIM card's - one for business (fully claimed)-one for personal calls (no claim).

  • Ocker on 04/07/2018 - 18:13
    +2

    And there will be CGT implications when you come to sell the property, viz you cannot claim the entire property as your principal place of residence and CGT will apply to the portion of the property used for business.

  • 87percent on 04/07/2018 - 19:09

    The sensible advice is speak to a dang accountant

    • John Kimble on 04/07/2018 - 20:01

      Why only an Asian accountant?

  • hassy150305 on 04/07/2018 - 23:35

    Once you meet the requirements allowing you to claim your interest expense, you will be subject to CGT, regardless of whether you have claimed the interest expense or not.

    If you meet the 'Interest deductibility test' you should claim your mortgage interest as an expenses, otherwise you will lose the full Principal Place of Residence Exemption and have no tax deduction benefit.

    See "Interest deductibility test' section paragraph 4 on https://www.ato.gov.au/business/income-and-deductions-for-bu…

    • HighAndDry on 05/07/2018 - 10:07

      This only applies if OP claims other home office expenses.

  • hassy150305 on 05/07/2018 - 06:33
    +3

    Also, CGT can usually be brought to nil.
    Eg.
    $400,000.00 capital gain.
    10% for you home for business purposes = $40,000.00
    Less 50% general discount $20,000.00
    Less 50% SBE Active asset discount $10,000.00
    = $10,000.00 Taxable gain.

    Retire or put into Super fund = no tax payable (Retirement exemption)
    Buy a new house and continue to operate business from there = no tax payable (Rollover exemption)

    Feel free to pm me if you have any other queries regarding this.

    • Gerbud on 05/07/2018 - 12:19

      Thanks a million - this is the type of example I was looking for :)

      Does the company need to own the asset to qualify for SBE?

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