What is a home-based business?
Most active small businesses are start-ups, independent contractors or sole proprietors where people operate a business at or from home.
A home-based business can be:
- the base for a business, such as a tradesperson working out of their home base and onsite at the client's premises
- the place of business, such as a hairdresser working mainly at their own home
- a consultant or contractor with a home office often visiting clients
- the base for an online business.
Registrations and licences
Make sure your home is a suitable location, especially if you plan on having clients visiting.
When working from home, some businesses require special registrations or licences, as well as a council planning permit.
Contact your local council for further advice on planning permits and other local requirements.
Insuring a home-based business
A common misunderstanding among home-based business owners is they believe they're adequately covered by a domestic home and contents insurance policy because they're operating from home – but that's not necessarily always the case.
To find out more, read our page on finding the right insurance.
Tax deductions for a home-based business
There are two types of deductible expenses – running and occupancy expenses.
The Australian Taxation Office (ATO) allows you to claim these two types of expenses normally associated with running a home. If you set aside a specific work area, you can claim both. If you haven't set aside an area just for the business, you can only claim running expenses.
Home-based business running costs include:
- electricity
- printer consumables
- cleaning
- phone costs.
Home-based business occupancy expenses include:
- rent
- mortgage interest
- insurance premiums
- council rates.
The ATO website has a range of online guides and calculators to assist small businesses with their tax obligations.
The cost of travel for business purposes is usually deductible so you may be able to claim the cost of trips between your home and other places if the trips are business related.
Beware of capital gains tax
Be aware that if you use part of the home for a business, you may have to pay capital gains tax (CGT) when you sell the house, even if you didn't claim any deductions for mortgage interest or occupancy costs when you ran the business.
Check the details on the ATO website or consult a tax professional.
Land tax liability
Home based businesses may be subject to the payment of land tax to the State Revenue Office.
Contact information for your home business
You'll need to provide contact information for your clients, suppliers, invoices and receipts. If you don't have customers and clients visiting, you may want to avoid providing your home address.
Post Office Box
Set up a post office box (PO Box), or locked bag with Australia Post.
Australia Post also offer a paid notification service that keeps you updated when mail needs to be collected from your post office box.
Private mailbox
You can receive a street number address if you want to avoid offering a PO Box as your address.
Virtual office
This option can simply provide a street address and answering service, but can also provide printing, copying and courier services as well as boardroom and meeting room hire. There are many business centres offering virtual office facilities across Victoria.
Phone
You may need an extra phone line for business calls. A separate phone line helps keep business costs separate for taxes and reporting. An answering service can help provide a professional appearance if you're busy with a client, or on the road and unable to answer your phone.
Use your local council
Council websites often have information about business activity in their area and support for home-based businesses.
This can be a good way to work out who is your competition and plan how you'll market your products or services.
For details of all Victorian councils including their websites, visit find your local council.