Capital gain tax on home with study office

[TILT]

Can you run any small advisory business from home in your study for a couple of hours a week without it affecting capital gains tax on principle place of residence?

ATO does not seem to cover it that well. It talks about a business of convenience. Does anybody know what that means.?

Considering many people operate small part time businesses from their studies these days there does not seem to be enough info out there,
.

 

[Paul@PFI]

Personal tax advice is best obtained.

In general terms a home based business would impose CGT on some of the home when the home is a place of business. ie warehouse, office and even sales activities. Examples = hairdresser, tax agent ? and dentists. In such cases identification of a % of area etc may be required. And may not be optional.

Operating a study / office and claiming operating costs should not result in a CGT issue.

You may need guidance to maximise deductions and satisfy ATO substantiation requirements eg diary basis etc. A home study does not involve claiming any % of ownership costs like interest, rates etc.

And then there can be a land tax concern too...A house etc that is not predominantly a occupied residence may fail the exemption requirements in some states.

 

[TILT]

Thanks Paul. There is no intention of claiming operating costs. It is only used for a few hours a week.

Seems to be there should be a distinction between somebody setting up a commercial operation such as a nail salon or dentist and a person who invites a client into his home study for a few hours a week to give advice.

Does anybody know what the ATO refers to as a "business of convenience"

 

[Paul@PFI]

See https://www.ato.gov.au/individuals/...als---claiming-work-related-expenses/?page=15 in which case they refer to convenience in the context of a employee say working at home one day a week using a dedicated workspace as an IT employee. Convenience for purposes of travel, child care perhaps, etc. That doesn't make it a "place of business" even if they are doing the employers work in that space.

In the example you give of meeting a few times a week for convenience I still don't believe home is a place of business however it could be argued it is if you generate income from an advisory business and such meeting may be better conducted outside the home for this reason. It does take some very intended changes to make home a place of business. None of these are conclusive but are some issues.... eg signage, fixed office with public access, likely a DA from council, dedicated area/s, fitout etc. Also a likely test may be use of an ABN and generation of income on site rather that say at client premises. This is often easier to argue where something is being made ie assembly, packaging etc.

I would meet elsewhere to avoid a concern. In which case your deductions are limited to occupancy costs

 

[TILT]

Paul . Thanks again for your detailed answer.Seems to be a blurred area.

Seems Millions of people in Australia who do some form of business from home are unintentionally open to losing some of their tax free capital gains.

 

[Paul@PFI]

You are applying an incorrect assumption to your view. Its a very common one. Most people think their home is tax exempt. Not so....

All property is subject to CGT unless it is otherwise exempt. The Main residence Exemption rules must ALL be satisfied for every day of ownership.

https://www.ato.gov.au/General/Prop...n-residence-exemption-from-capital-gains-tax/

 

[baby blue eyes]

https://www.ato.gov.au/Business/Inc...usiness/?page=8#How_capital_gains_tax_applies