Tax question i have a small business in sydney australia.NEED HELP URGENTLY.with understanding this?

I run a small business and have a three bedroom house i rent $250pw.I use one of the rooms as my office.the tax book i got from the ATO says i have to work out what percent is used for private use and what percent is used for the business.when recording my tax Manually by paper.how do i work this out.Also the electricity bills.im assuming with the phone bill i itemise the calls ive made for the business would that be right.YOUR ADVISE IS GREATLY APPRECIATED

Hi there,

i have attached the tax information for your reference (have a look on page 15 and 16 on NAT 10709).

Basically for the electricity bill, you can keep a diary to came up with the figure (on NAT 10709), or claim 26 cents an hour (easier method).

You can claim percentage of rent and insurance that relates to your floor office area. (your office area divided by the total house area = your business proportion)

Hope it helps

What you need to do is get a floorplan of your house and use the following simple formula to work out the proportion of rent you can claim:

[Office Room in metres squared] divided by [Whole House in metres squared] = [Percentage Claimable]

[Total Rent Paid in Tax Year] x [Percentage Claimable] = [Amount Claimable as a Deduction]

If you can't get a floorplan from the owner, a fun maths game with the kids is "let's run around with the tape measure and measure the house and draw it to scale on grid paper!". LOL

If a room is 5 metres wide and 4 metres long, it will be 20 metres squared (5 x 4 = 20).

If a house is not a simple square or rectangle shape to measure, then "divide" it into sections of metres squared amounts and add them together to get total metres squared.

So if your office is 20 m squ. and the house is 100 m squ., then you can claim 1/5 or 20% of your rent.

You might also claim this percentage of electricity too but usage of a utility is different to floorspace usage, so I'd recommend basing your claim on a notional increment of usage (e.g. my bills are normally $150 pq but since I've run the business they've gone up to $200, so I'll claim the rough increment of $50 pq). Or you could claim the notional "home office running expenses" of 26c per hour (see the tax book you have there - it can be a good claim).

Insurance of equipment is not based on floorspace either. If you have contents insurance, examine the policy and roughly work out the proportion of business equipment replacement value covered compared to domestic goods.

For the phone, itemise a typical month's bill for a percentage of business calls to total calls - then use that % for the whole years' bills unless your usage significantly changes. Some people's business use fluctuates so much that they just make a reasonable estimate of business usage each month.