Tax implications of renting an office for my business?

Hey Guys,

I am about to start a business and just need to know some detail around claiming rent as tax deduction for my office:

1) I will be renting a room (privately) in a residential complex.
2) My company is will be registered for GST, however the Landlord's company is not
3) It is a genuine office - will be used for meetings, work etc

What are the tax & GST implications of this scenario? What documents do I need to provide my accountant at tax time - bank statements, lease agreement/documents?

Your help is much appreciated

 

If the lessor isn't registered for GST, they can't issue you a tax invoice or increase the rent to include GST (gross up). You can only claim the actual amount paid but don't get any GST credits.

 

To show it is a place of business you will need the hallmarks of a business office. And while this will vary depending on the facts a bedroom with a desk instead of bed is probably not sufficient.

A place of business would typically have external signage, a client entry foyer and public parking.

If the office is not physically attached to your home you should be ok to claim it as a tax deduction.

A good example is a country petrol station with the house at the back. The petrol bowser and the shop rent is tax deductible and the home bathroom is not.

 

And in a residential complex, are businesses allowed?
Marg

 

Yes, residential unit block.

The landlord is willing to put it in writing that the room can be used as commercial office, so I would assume that's as far as my DD needs to go on this issue?

 

I would have thought the local council might be interested in this?

 

And the body corporate too.

 

True but one could be lucky and strike a slack/dysfunctional BC who take ages to take action/go soft on such issues/...

In the local council, there is probably some little 'Hilter' just waiting to wield their power ...

Either way, every chance the office will be closed down IMHO

 

I think if it's a home office and won't result in lots of visiting clients taking up parking etc then it probably won't be a problem.

I have a friend in Melbourne who rents a 3- bedroom suburban house as his home and uses one bedroom as the office for his contracting business (company not sole trader). He does not have or need a sign as all his work is done through HI Pages, word of mouth and going to meet clients.

Four days a week, he has an assistant work in the office too.
He claims the office component on tax, no problem.

Most if not all Councils have business support programs, so keep an eye out for the networking events etc that they hold.

 

The OP stated:

3) It is a genuine office - will be used for meetings, work etc​

I took this to mean that there will be people coming and going - suppliers, service providers, prospective customers, existing clients, ...

If the OP wanted a ''home office', why not set it up at home? Not enough space? Doesn't want suppliers, service providers, prospective customers and existing clients coming to their home? Who knows?

The OP mentioned lease agreements; so I assume they will be paying rent. Sounds like a serious commitment to me.

I still think someone will complain and they run the risk of this office being shut down.

 

No mention of whether it's a permitted use, had existing use rights etc or if they were required to lodge a DA for the use. For all we know, it could be shoptop housing and the property is approved.

 

have you also checked with your insurance company that you will be covered by public liability insurance if the purpose is not approved by council. dont honestly know the answer but worth checking out. wouldn't want your clients to injure themselves in the room and then find out you are personally liable.

 

Highly likely to be an unlawful use.

This could result in
:
1. Nothing happening ever; or
2. Someone complaining to council or BC.

If no complaints then you often fly under the radar and never get caught.