Understanding The New Rules For Home-based Business Expenses

Home-based business expenses can include everything from mortgage interest or rent to utilities, insurance, and office supplies. These expenses can have a significant impact on your business’s bottom line, and failing to keep track of them can lead to missed tax deductions and financial difficulties.

Since working from home has become increasingly popular in recent years, and the COVID-19 pandemic has accelerated this trend even further. Many people have found themselves running a business from their homes, whether it’s a small side hustle or a full-time enterprise. If you’re one of these entrepreneurs, it’s essential to understand the expenses associated with running a home-based business.

Claiming expenses that are legitimately associated with your home-based business is critical to maximising your profitability and cash flow. However, it’s also important to ensure that you’re complying with tax laws and regulations. This means keeping detailed records of all your business-related expenses, understanding the rules around claiming deductions, and seeking professional advice if you’re unsure about any aspect of your tax obligations.

New changes to home-based business expenses

home-based business

If your business is based at your home, you may be eligible to claim the portion of expenses that you use for business purposes. 

These expenses can include occupancy costs, like mortgage interest or rent, council rates, land taxes, and home insurance premiums, as well as running expenses, such as electricity, gas, phone, internet, stationery, cleaning, and the depreciation of assets. 

It’s worth noting that the temporary shortcut method for claiming these expenses expired on 30 June 2022, and the fixed-rate method has been updated.

Starting from the 2022-23 financial year, the updated fixed rate is 67 cents per hour. As a result, you’re no longer required to:

  • Maintaining a dedicated home office space.
  • Calculating the business-use portion of phone, internet, gas, and electricity separately.
  • Claiming the depreciation of assets and equipment separately, along with any repair and maintenance expenses.

Maintaining Accurate Records under the Revised Fixed-Rate Method

maintain accurate records

To use the updated fixed-rate method, you must maintain a record of all the hours worked from home throughout the financial year, which could be on a timesheet, roster, or diary.

However, if you haven’t kept a record of the hours worked from home, you can use a representative record of your hours from July 1, 2022, to February 28, 2023. But, you will need a record of your actual hours worked between March 1, 2023, and June 30, 2023.

It’s essential to note that the method and expenses you can claim could be affected by your business structure.

Bottomline

Navigating home-based business expenses and claiming deductions can be complex, especially with the recent changes to the fixed-rate method.

At BloomWealth Accountants, we understand the importance of accurately tracking expenses and ensuring compliance with tax laws. Our team of experienced accountants can assist you in understanding the rules around claiming deductions and help you maximise your tax benefits while avoiding any potential pitfalls. Contact us today to learn more about how we can support your home-based business’s financial needs.

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