Thread: Own shop at home. Tax deductible?

I ran a small manufacturing business from home for almost 22 years. I was running quite an array of machinery, with, at various times and sometimes together, a vulcanising press, a vacuum system for bleeding air out of material, a quite powerful Laser engraver, a thermal fusion process as well as various other little things.

I did receive council permission after investigating state laws, to employ one person between the hours of 0700 hr to 1800 hr Monday to Friday. With that person being someone who did not reside in the house.

Whether or not you claim for deductions, if your business is even only moderately successful, you may find that upon selling a house which is your domicile, there could be a capital gain component added. This information actually came as a surprise to us, but as the other half is an accountant, we had access to the then current tax act. Although I haven’t looked into this aspect of late, I would think this part of the tax act would still be in force.

The most interesting fact, if memory serves me correctly, is that this capital gains aspect of your domicile would be enforced whether or not you claimed deductions; they do a retrospective calculation and apply it to your property when they receive notification of your house sale.

You can successfully run many businesses from a home, the type of business you wish to run, can make or break whether or not you can do so. I would suggest you enquire either directly or indirectly, with your local and state governments.

The other thing I would suggest you do, is check with an accountant to see if you have a viable business plan.

Mick.

Careful with claiming part of your mortgage. You own home is capital gains tax free if you sell it but I'm led to believe that any part you claim a mortgage deduction on isn't.

Talk to accountant.

As warned in a few previous posts, our accountant advised of possibility of having to pay capital gains tax on house.

Bill

Originally Posted by BobL

This might be easier to read

Thank you Bob L for your help opening up that text I posted. Still learning layout when Looked it was cramped up but was in a hurry to do some thing else. Many thanks makes it easier to read now. Happy New Year to you and other M Workers

Originally Posted by j.ashburn

Thank you Bob L for your help opening up that text I posted. Still learning layout when Looked it was cramped up but was in a hurry to do some thing else. Many thanks makes it easier to read now. Happy New Year to you and other M Workers

No worries,

Off down south camping and was hanging around the campfire having a few drinks and waiting for dinner to be cooked. Formatting your post to maybe make it easier was about all I had the energy for.

FWIW, I had a tax audit a few years ago and was told by the tax inspector about the likelihood of paying capital gains on any profit upon sale of the property used for the business if any claims were made in relation to property assets, so it's not just if you claim the proportion of cost of loan repayments or rental. I had this checked out by a relative tax auditor and he said the are is a grey one so its something to watch out for.

Hi Guys,

You know reading through these posts, I realise that there are lots of things that I have forgotten in the passage of time. But the one thing that I was reminded of was the £8000.00p that it cost me in capital gains when I sold my first property. It was the sale that allowed me to buy my first business premises. Quite frankly if it weren't for a brilliant accountant, who has become a lifelong friend and a very astute bank manager that progression would never have happened.

Not to put a wet blanket on this, but forgot to mention, that you need a fair bit of capital $ behind you. Work on not getting paid for the first 3 months????(time you get the job in, do the job, invoice out, to getting paid =3 months), your wages, electricity, rent, GST, material, equipment, consumables, breakdowns/repairs, set up costs, (reg. business name, moving costs, down time, electrician, advertising), etc, all have to come from some where. Allow for someone to go bust on you, I've had 3 do that to me, total $20,000 + in 3 years. Work out time spent on the phone/ talking to customers. I've spent/wasted some days 6 hours!!!!!. If I was in a position to be able to be self employed, I wouldn't, unless I had $100,000 minimum, behind me. No matter how much equipment you've got, there will always be something required that will make the job more profitable, easier.
Kryn

The GST threshold is now $75K, i'd seriously think about starting as a cash business that is not registered and see how it goes. Use all the free advertising you can, gumtree and facebook are fantastic tools if used the right way. I have landed some great work from a free gumtree add.

I'd also suggest trying to start off part time, work at night, w/ends whatever. Build up an income stream and customer base before you go full time.

Never ever ever ever ever ever (etc) discount just how much time you will spend on public relations. I am at the point of selling some of my products to a retailer just to ease the amount of PR i have to do. I'm sick of sitting up all night replying to emails!

Good luck

Originally Posted by MilitaryGrade

Hi,

I have am planning to possibly start my own shop in the future.

I could buy a warehouse or preferrably start one in my own garage at home.

If I were to start my own shop at home (i will make it soundproof) the only problem I am worried about is tax deductions from business expenses from utilities such as electricity.

I have done some research and I found out that these expenses are deductible but only from the portion that is part of your business. I also read that the zoning of your property must be suitable for the type of work your doing or else you will not be eligible for any deductions. Is this true?

Anyone here operate their own shop out of their own home successfully?

Many questions here, directly or by elevation.

You can start a business by jumping at it and hoping for the best or you can do some research to see if it is going to be viable and worth your while.
Buying a warehouse or start from home are not necessarily the best options to start a business.

Buying a warehouse equates to saddle you with a large unproductive debt perhaps with the hope of some capital gain. The way the market is in Sydney, this may eventuate a long time down the line.

Working from home has a lot of hidden pitfalls. Besides the many already mentioned, if you have a family and you work from home, you are not actually at work. You are at home, and can be interrupted any time for any reason in any context. You are just there. Some may like this, others plainly hate it and tell you the worst decision ever was to work from home.

Best obvious alternative is to rent a space for you business. Lets face it, if your business can not afford a rent, it's not a business its a hobby.
Most people that work from home actually run a more or less profitable hobby. Nothing wrong with that, but lets call a spade a spade.

As far as tax questions, how can you possibly base your decisions about tax deductions and other tax and business matters on our replies? Unless there is a member here qualified as a chartered accountant and willing to offer free advice, you must consult a smart accountant. And I mean a smart one. I changed accountant many times until I found one that was smarter than me and not dumber. Wasn't easy either not because I am so smart but because there are a lot of dumb one around pretending to know business yet all they do is repeat the little bits and pieces they overhear from their customers.

Define what you do. Business or hobby?
Get professional advice always.
Tax from accountant, money from a person that is richer than you, business from a businessman that is more successful than you, technical from a person that knows more than you.
Beware of "free" advice.
Best of luck in your new adventure.
Marc

A smart person hires smarter people then them selves