ATO updates tax guidance for home-based businesses

The Australian Taxation Office has advised that it will be accepting a temporary short-cut method from 1 March 2020 until at least 30 June 2020, allowing business owners of home-based businesses to claim a rate of 80 cents per hour for all their running expenses.

The ATO’s definition of a home-based business is one where the business owners’ home is also their principal place of business. That is, they run their business at or from home, and have a room or space set aside exclusively for business activities.

Business owners operating under these conditions may be able to claim tax deductions for home-based business expenses in the following categories:

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

The ATO has also advised that if the home is not a business owners’ principal (or main) place of business but they do some work from home, they may still be able to claim a deduction for some of their expenses relating to the area they use.

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