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Re: Tax allowance for home office

Newbie

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When your paying rent for your house and you have a home business. I normally deducted an allowance from my yearly rental for the office I have set up in my house. For the house I was in it would have been one fifth (1/5) of the rental for the year and add this allowance onto my cash book prior to doing the tax return.

 

Example: for a $750 weekly rental I would have multiplied this 52 and then divided by 5 to work out the office rental allowance. $750 x 52 = $39000 then divide by 5 = $7800 for the year.

 

Pretty straight forward!

 

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How would I work out the amount of allowance if I have a mortgage? A little more complicated!

 

Basically we brought a house worth $650000. After deposits were paid we have been left with an approx. Mortgage left to pay back of $375000, which fortnightly works out to be $661 so weekly $330.50.

 

How can I work out what tax allowance I can show on my cash book for the office I have set up at home for my home working business?

 

Your advice would be greatly appreciated, so as I can show the correct amount on my cash book.

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Most helpful response

ATO Community Support

Replies 2

Hi @SK4,
 

You can find more information under Claiming a tax deduction for expenses for a home-based business.

 

Subject to the personal service income rules, if the home is your principal place of business then you will be able to claim a portion of your Mortgage interest under occupancy expenses.

 

The portion of the costs that relates to the room or workshop used as a place of business may be deductible.  A common method of working out how much to claim is the floor area (as a portion of the floor area of the home as a whole).

 

So for example if the portion of your home office is 20% of the floor space of your home and the annual interest you pay on the mortgage of $375,000 is $10,000. Your allowable deduction is $2000 ($10000 - mortgage interest x 20% - home office floor space).

 

 

Links

Claiming a tax deduction for expenses for a home-based business

 

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

Hi @SK4,
 

You can find more information under Claiming a tax deduction for expenses for a home-based business.

 

Subject to the personal service income rules, if the home is your principal place of business then you will be able to claim a portion of your Mortgage interest under occupancy expenses.

 

The portion of the costs that relates to the room or workshop used as a place of business may be deductible.  A common method of working out how much to claim is the floor area (as a portion of the floor area of the home as a whole).

 

So for example if the portion of your home office is 20% of the floor space of your home and the annual interest you pay on the mortgage of $375,000 is $10,000. Your allowable deduction is $2000 ($10000 - mortgage interest x 20% - home office floor space).

 

 

Links

Claiming a tax deduction for expenses for a home-based business

 

Newbie

Replies 1

Hi And thanks for answering my question.

 

I just want to eleberate on this a little more.

 

Say for instance that i had brought the house and didnt owe any money on it, so in effect not paying any mortgage so paying zero each month. how can i work out how much allowable tax deduction to allow for my home working business?

 

Thank you.

ATO Community Support

Replies 0

Hello @SK4

 

If you own a home without a mortgage, you can't claim a deduction for mortgage interest, but you can still claim other occupancy expenses, such as council rates, land taxes and insurance premiums. You still use the calculation method provided by @RenATO to calculate the amount of the other occupancy expenses you can claim.


You can find more information under: Occupancy expenses

 

All the best,

 

Tony