Contrary to popular belief by most Home Business Operators in Australia, it IS completely possible to grab yourself a partial (or even full), tax deduction for the interest on your home loan; among many other 'personal' expenses NOT commonly accepted as 'business' expenses (more on this later).
When it comes to safe (and readily available) financial and tax advantages, right now, Australian home business owners, just like you, are experiencing the highest degree of a false sense of knowing - of scandalous (and almost farcical) proportions.
Unless you’ve been living under a rock for the last few years, you must have noticed our banking, finance and tax professionals making the headlines in one way or another:
“ATO Report: Small and Medium Business Confidence Rating in Tax Professionals at all-time low ...”
- ATO: Small Business Newsroom Service and Digital Interaction Research 2017
“Tax Agents Still Owe $90 million On Their Personal Tax Returns …”
- Sydney Morning Herald, February 22 2017
“Returns Lodged By Agents Found To Need More Adjustments Than Self-Prepares …”
- Tax and Super News Room, April 2018
“Small Business Blames ‘Real Tightening' in Credit on the Banking Royal Commission …”
- Australian Financial Review, Sep 2018
“SCANDEL: Banking Royal Commission Investigates Super Sectors – Over $1bn of Aussie Super Funds Caught Up in Large-scale Rorting ... ”
- Australian Financial Review, August 30, 2018
“Australia’s $4bn Super blackhole impacting self-employed most …”
- SMSF Advisor, April 2019.
The situation is so palpable, some leading writers have really ‘stuck-the-knife-in’ to the very heart of the system:
“Recently, the Commissioner of Taxation Chris Jordan AO made some comments in his speech to The Tax Institute highlighting a number of concerns about over-claiming of deductions and the higher rate of adjustments made to tax agent prepared returns, compared to those that were self-prepared.
Senior Tax Counsel Bob Deutsch asked for more detail. In our work to date our enquiries have revealed errors across the return but most adjustments relate to deductions, particularly for work-related expenses. The majority of errors relate to mistakes or carelessness and over-claiming … “
- Commissioner of Taxation, Chris Jordan AO, The Tax Institute, 2018.
It all makes for disturbing reading.
But what does the Australian business community actually think about the current tax system – specifically how it relates to operating your business from home?
And are people REALLY THAT concerned or just mildly annoyed?
And are people REALLY THAT concerned or just mildly annoyed?
What about you?
Our ongoing research consistently shows that practitioners are systemically failing home business owners and that we owe it to ourselves to ask some fundamental questions:
How concerned am I that my tax practitioner really knows how I should best operate my home business?
Not much, a little bit or VERY concerned.
Am I on course to reach my goals on the back of how my business has performed to date, and into the future?
Yes, no, maybe or not sure.
Is the sale of my business my main method of saving for my retirement?
Yes / No.
How much do I think I'll need to save to have a respectable lifestyle when I can, or no long longer want to, work?
$500K? $1M? $2.5M? ... more?
Am I relying on my tax practitioner to ensure I receive the full amount of legal of tax relief possible in my unique position as a home business owner?
Yes / No / Very much, but I don’t know what they don’t know.
Is it ever too late to counteract the damage done by the practice?
The answer here is: It’s never too late!
Should we really be concerned?
Grab your (COMPLETE) FREE COPY of my 1st Release ‘The Curse of Conformity Report’ here ...
If we extend ourselves to think beyond ‘Taxation’ and look at more fundamental and long-term success planning, it seems logical to start with the following quote from The Association of Superannuation Funds of Australia Ltd’s (ASFA) report entitled:
‘Superannuation balances of the self employed”…
“Broadly speaking, the self-employed make lower contributions than their employees.”
… considering the lack of confidence in our economy by our community (simply search ‘business confidence Australia’); this is when things start to look really hairy.
And if you consider the insights from the 160 page ‘Australian Tax Office’s (ATO) Small Business Engagement 2017’ report, you might be as shocked as I was:
“What benefits are there to using your tax professional?” a mere 10% of Small to Medium business owners responded:
Worse still ...
Only “61% of business owners valued ‘Having the tax knowledge/expertise’ as a key benefit ...”
That’s a whopping 11% DECREASE (DOWN from 72% in the 2015 report).
The largest drop of all the benefits studied.
If this trend continues, we’ll be looking at, a meager 48% of business owners seeing ‘Having the tax knowledge/expertise’ as a benefit of using a tax professional.
Source: Source: Energy Australia | engergy.gov.au > household-guides > home-based-business
And when you take into account the findings from this report from REST Industry Super Fund, the answer to the question ‘Should we REALLY be concerned?’, is becoming quite clear:
“Small and Medium (SME) Business Owners retirement plans in jeopardy, research finds …”
A new survey has found small business owners are at risk of watching their retirement plans fail, with Small to Medium Enterprises (SME) underprepared when it comes to financial and contingency planning.
‘SME owners are relatively unprepared for the future when it comes to planning for their financial security – in terms of both their ability to continue supporting their livelihood following an unexpected event, as well as their plans for an eventual retirement.’ chief executive Damian Hill said.
Given that more than 50% of business owners consider the sale of their business important in funding their retirement, it's concerning that most respondents believe their businesses could not be profitable without their involvement in day-to-day operations. “
“This gap highlights the importance of SME owners to look beyond the sale of their business to fund their retirement ... SME owners put themselves at risk if they rely solely on the sale of their business – and the assumption that it will remain viable for sale – upon retirement.” Mr Hill said.’
- REST Industry Super Fund - November 2016
This point is absolutely crucial:
Expectations of business owners of what constitutes good tax advice in the day-to-day running’s, all the way through to the sale of their business is often FAR, FAR higher than the reality!
In fact, some people say they are better off figuring out how to meet their tax obligations all by themselves.
And thanks to constant uncertainty and rapid technological change, some even say their current businesses valuations won't be worth the paper they are written on in just 5, 3…
Or even 1 year(s) from now!
It's plain alarming and so… yes, it’s fair to say you SHOULD be more than concerned, you should be WORRIED!
If you answered ‘Not much’, or ‘a little bit’ when I asked “How concerned ARE you about your tax professional’s knowledge - specifically how it relates to operating your business from home?”…
I wanted to help you realise these shocking facts FIRST - to put commonly accepted and specialised, ‘professional’ advice squarely in context - where the facts CLEARLY contradict popular belief.
This drop-in confidence in tax professionals and the seemingly non-existent path for the ‘self-employed’ to find tax relief anywhere close to what the ‘the big-end-of-town’ is experiencing, is due to a multitude of factors.
First, home business owners are fed an astonishing array of predictable and un-inspiring ‘tax-entitlement’ mantras:
For example, take a look at the information presented on the Australian Tax Office’s “Running your business from home” website:
They’ve done a great job from an ATO perspective!
However, it is light on details about what is possible from YOUR perspective, as someone operating a business from their home, who wants the best for themselves, their future and the ones they care about.
This is in fact, fine - as it's not the ATO's job to help you legally minimise tax – it's yours - and your practitioner’s.
The ATO would be oblivious to whether you or your practitioner have done a good job, as its systems and processes aren't set up to detect YOUR individualised success - as a home business operator.
It’s more basic from their perspective – simply, audit flags pop-up for your potential non-compliance – which is in stark contrast to you having a rock-solid home business financial and lifestyle strategy.
It's vital you know that with home businesses, there are two sets of costs that you might be able to claim:
1) running costs and;
2) occupancy costs
Running costs are the additional costs specifically because there's a business e.g. the extra phone, internet, power and gas bills that you might incur (but I have to say that it's pretty hard to get excited about these as it's really just small change).
Occupancy costs are those that exist regardless of whether or not there's a home business and so providing your home is a "place of business", then you can claim them. In other words, there's one or more areas set aside for your business which can't be readily adapted to private use.
This is where things get really interesting, because like I indicated, the costs of owning and maintaining these spaces still exist regardless of whether or not there's a business at your home.
The good stuff really worth claiming, which by the way - is ONLY and EXCLUSIVELY available to those that operate their business from home, can includes such things as:
• Mortgage interest
• Home insurance
• Building depreciation
• Water and council rates
• Private jetty, pool and alfresco areas … yep (keep reading because there’s more on this later).
And with all due respect to the tax office – their content is very conservative and minimalist in its approach – particularly around operating a business from one’s home.
It has been mentioned here before, and it’s worth mentioning again …
it’s not the ATO’s job to have you think about multiple rooms, multiple businesses, foyers and hallways, storage, outdoor areas, driveways and parking areas IN and ON your property in order to maximise your tax and cash-flow opportunities as a home business operator - it’s yours and your practitioners.
Just as with mortgage interest, there is very little, free and reliable and insight available into what’s possible.
The internet is awash with vague and conformist information.
Advice that, even if you believe it to be true, does not address the opportunity hiding in plain sight.
One could even be forgiven for thinking some of the information borders on scaremongering in an attempt to play-down a lack of true knowledge, expertise and application of this knowledge, in order to create simple win-win scenarios.
Building depreciation on your home and, by which, I mean the building itself.
Just try searching “home business building depreciation Australia” and as you'll very quickly start to see, there are no meaningful resources on this from the ATO or ‘popular’ industry leaders – specifically for home business operators.
The availability and specificity of new, useful and insightful information on the topic is curiously lacking. Interestingly, my tax practice had the tax office issue formal written tax advice for the explicit protection of our clients - agreeing that capital works deductions are allowable.
“My ‘Curse of Conformity report introduces you to a unique, PROVEN platform (Deduct Your Home), that enables Australian home business owners to discover the “Cash Flow Holy Grail” for running their business’ from their homes.
It is the only platform in existence that combines such powerful, immediate and lasting; financial, property, business, taxation and lifestyle benefits, specifically for Australian home business.”
- Frank Genovesi, creator of Deduct Your Home
Whether you are in the know or otherwise; by now you would most likely be asking (and if not, you should be) “But what about The Capital Gains Tax (CGT)?"
Exactly ... what about it?
Page 24 of my report calls-out “The CGT Elephant in the Room”, where I help you appreciate having a healthy CGT bill is actually a good, no, GREAT THING!
Furthermore, for the right home business, the ongoing deductions can easily amount to tens of thousands per annum on your:
- Swimming pool
- Stunning gourmet alfresco
- Dream kitchen
- Luxury bathrooms
- Home theatre and more.
The crazy part is, your accountant will (quite-rightly), tell you that none of these areas are, or ever will be, tax deductible in their own right, yet the Australian Tax Office (ATO) has privately approved such arrangements for our clients!
My report introduces you to a unique, new method (Deduct Your Home), that enables you to discover the Holy Grail for Home Business, as it is the only method in existence that combines such powerful, immediate and lasting; business, taxation, wealth and lifestyle benefits.
Deduct Your Home shifts you out of NOT KNOWING:
- Why you're actually doing what you're doing;
- Who you really can be and what your business is capable of achieving;
- What really makes you happy…
- How to attract what you want from your business i.e. the vehicle as was intended to get you there in the first place!
In this unique, 1st Release report you will discover ...
A BRAND NEW (yet hiding-in-plain-sight) approach to immediate and lasting wealth and lifestyle building that 99-7% of all Home-Based Business operators have never seen ...
SECRET #1. Find The "Holy Grail" For Austrlian Home Business!
Discover "Deduct Your Home" ... which is being called the "Holy Grail" of wealth and lifestyle building for home-based business owners (just like you)!
SECRET #2. Shocking Stats About Your Money!
NEW Discovery reveals almost ALL Australian Home Business Owners are receiving tax advice that's leaving Business and Personal Fortunes on the table from asleep-at-the-wheel 'Tax Professionals'. This report exposes where it HITS YOU HARD - and how to fix it ...
SECRET #3. How a Powerful, Yet Simple, Strategy allows you to realise your dreams!
"Deduct Your Home" ... which is being dubbed the "Holy Grail" of FAST cash flow and lifestyle building for Australian home-based business owners!
Discover my unique method that's so simple, yet so POWERFUL, it will blow your mind ...
AND how you can have it working in your home business in a matter of days or weeks - and, depending on your circumstances, not having to borrow any money or doing much different than you're doing now!
Grab your (COMPLETE) FREE COPY of my 1st Release ‘The Curse of Conformity Report’ here ...
subtitled "The Australian Home Business Advantage!"
What Do YOU Think? ...
Q: Is it possible, as a home business in a Australia, to deduct your mortgage interest and not fear the Capital Gains Tax (CGT)?
We're a friendly bunch! Go ahead and add a comment, start a converstaion or "chime-in" on the discussion below.
Australia's sole, experienced and trusted integrated financial, property, taxation, business and lifestyle strategist. Helping Business Owners turn their business’ into remarkable lifestyles
Frank is a versatile and experienced businessman and entrepreneur with a solid background in business, taxation, property, financial planning, life insurance, superannuation and self-managed super funds advisory.
Frank currently holds a number of titles, including CEO of Intellisolve, Fellow of the National Tax and Accountants' Association, Real Estate and Business Sales Professional (WA), ASIC Registered Agent, Registered Tax Agent, Public Accountant, Lifestyle Strategist, Tax Planning Expert and Business Adviser.
Frank’s passion is to help business operators become more strategic ... and to FINALLY achieve the "Cash Flow Holy Grail" of business ownership i.e. where your gain FAR EXCEEDS your effort.
He constantly pushes the boundaries of what’s possible and is widely regarded among his peers as an unrivaled thought leader who is highly creative in his approach - in order for you to prosper like never before.