BUSINESS RUNNING EXPENSES

If you have a sole purpose office at home, you can claim electricity, gas, and water consumption, on the same % as the office to the total floor size. Claiming running expenses does not lead to Capital Gains Tax (CGT) when the house is sold.

Claiming occupancy expenses such as loan interest, rates and water connection will mean that when the house is sold, there will be CGT, but not on the whole profit. Say 10% of the house has been used for the business for 5 out of the 10 year ownership period, and there is a $400k gain. You would then be taxed on $400k x 50% (5 of 10 years) x 10% (% of house) x 50% (general exemption). This amounts to a meagre $10k added to your taxable income. Far less tax potentially than the tax savings made by claiming the occupancy expenses for the 5 year period. Each case of course needs to be judged on its merits.

Other expenses that you can claim if you are working from home are toilet paper, coffee / tea, milk and cleaning products. These make for the perfect tax deduction, because a private expense can be turned into a business expense. You are paying for these anyway, so you may as well save some tax at the same time.

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