Home based business could have depreciation tax benefits. Image : Canva
  • Running a business from home may come with a silver lining come tax-time
  • The average first year depreciation claim reaches close to $8000
  • Claims can even be made on non-business related areas of the property

Some particularly lucrative tax deductions may offer a silver lining to the many businesses who have been forced to move their work home due to the pandemic. This is according to surveyors at BMT Tax Depreciation.

Depreciation is the natural decrease in asset value over time as it wears and tears. This cannot be claimed back on a place of residence, however, there is an exception for homes in which a business also operates.

BMT Tax Depreciation Chief Executive Officer, Bradley Beer, said that claiming back depreciation available for home businesses significantly affects cash flow.

“The average first year depreciation claims for tax depreciation schedules we completed for home based businesses in FY 2019/20 came to almost $8,000.”

Bradley Beer, BMT Tax Depreciation Chief Executive Officer

Mr Beer said the company completes tax depreciation schedules for a variety of home-based businesses.

“We have prepared tax depreciation schedules for startups, freelancers, trades, accountants and other self-employed professions where all they need is desk space and technology.”

Capital works deductions which are claimed on the structural component of the property including the home office walls, doors and windows, make up the bulk of claims.

Plant and equipment account for a smaller proportion.

Mr Beer confirmed this as he said based on the average claim of $8,000 “… capital works deductions accounted for about $6,650 and plant and equipment around $1,275. The plant and equipment deductions would have been for assets like computer equipment, office furnishing and tools.”

Business owners running their business from home can actually claim depreciation on areas of the property unrelated to business.

“Pro-rata deductions allow them to claim depreciation on these areas. The deduction is based on an apportioned value of the space, being the percentage of time it’s used for conducting business, compared to personal use.”

Bradley Beer, BMT Tax Depreciation Chief Executive Officer

Mr Beer believes numbers on claims are likely to rise in the next financial year.

“With the temporary full expensing policy in place until the close of the 2021-22 financial year, businesses can instantly deduct any eligible plant and equipment asset. For example, if they purchased a work ute for $40,000 this year, the entire amount could be claimed as a deduction at tax time,” he concluded.


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