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Claiming mortgage interest payments for home office

Discussion in 'Accounting & Tax' started by albanga, 17th Sep, 2015.

  1. albanga

    albanga Well-Known Member

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    Hi All,

    A little off investing topic but me and a colleague have been discussing if it is possible to claim the interest paid on your mortgage on your PPOR for a home office?

    I know you can claim a number of expenses associated with the home office but what about the actual mortgage payments?

    And if so, how is this calculated as a percentage of your house?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Hiya,

    Check with your own accountant as it pertains to your circumstances.

    Advice I got from my accountant was to measure the room I'm in. If that room equates to X% of the house's floor plan i can claim X% of mortgage, electricity bill, internet bill, phone bill, etc etc

    However, be aware this affects the CGT status of your home.
     
  3. pinkboy

    pinkboy Well-Known Member Premium Member

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    Yes, but there are other implications such as Capital Gains Tax on that portion claimed as well.

    Do your homework with professional help before proceeding.

    pinkboy
     
  4. albanga

    albanga Well-Known Member

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    Thanks for the quick replies.
    So even though it is your PPOR and you may be entitled to the PPOR exemption you will still need to pay CGT on the amount claimed?
     
  5. BennEznElle

    BennEznElle Well-Known Member

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    Depends on where your income comes from. If you are an employee woking from home, you can only claim operating costs (electricity etc.), not the occupancy costs (rates, interest etc.)

    If you are running a business then you may be able to claim the occupancy costs but as mentioned, will affect the CGT implications on the sale of your house.
     
  6. Perthguy

    Perthguy Well-Known Member

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    Possibly. There is a good page on the ATO site about this issue.
    https://www.ato.gov.au/General/Prop...g-a-business/Running-your-business-from-home/
     
  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    What do you mean by "home office" ?

    1. A place where business is conducted ?? ie clients attending, income producing activities etc ?
    or
    2.A place where you do work such as administration etc ?
    or
    3. Home and work are a mixed purpose

    One of the issues that pops up is that many renters also think since there is no CGT issue that its open slather to claim a % of home and call home a place of business. Where owners tend to shy off due to the associated CGT issue.

    Its very important to firstly define what the home is being used for. Overclaiming private expenses can have a nasty impact

    ATO basic explanation of home being a "principal" place of business.....

    Examples include:
    • a small business operator whose main office is in their home
    • a tradesperson or craftsperson who has their workshop at home
    • a doctor or dentist who has their surgery or consulting room at home.

    If you do only some business or work from home, in either a designated work area or another part of your home, refer instead to
    Working from home

    I have a issue here with the ATO use of the words "principal place of business". This may not necessarily mean the Corporations Act definition !! You cant just register a company and treat the home address as a PPOB and then claim away.
     
  8. Perthguy

    Perthguy Well-Known Member

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    I think they explain the concept a little more clearly in the following statement:
    They also explain some exceptions:
    My business partner runs a business out of a home based office where the office is used exclusively for income producing activities. He does not have an employer and his income does not include personal services income. He does incur some expenses in using his home for that purpose. I think that satisfies the criteria for claiming some expenses. How much and how they are calculated is another matter!
     
  9. albanga

    albanga Well-Known Member

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    This was not for myself but a general conversation a colleague of mine and I were having.
    We work in IT and are employed in a 9-5 job.
    My colleague however works a 4 day week and many nights and weekends for his other business which is self employed where he works purely from his home office. He does not claim rates and the interest on his mortgage and I thought he would be entitled to.

    In this scenario would you consider him being able to? In fairness he probably works an even split between his PAYG and personal business.
     
  10. Perthguy

    Perthguy Well-Known Member

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    Maybe. But would it be worth it considering possible CGT implications?