More and more people are choosing (or being forced to) work from home given the current global pandemic. Making the transition to home-based operations – especially if it is a quick jump – can be tricky. This article explores the pros and cons of working from home and looks at ways to make your home office experience more productive and enjoyable.
Twenty years ago working from home was a rarity now home-based businesses are an important sector of the business community, with nearly one million people operating a business at or from home. Technology has vastly helped the process: with computers, smartphones, online meetings and the Internet it’s easy to be accessible and connected, and difficult or impossible for customers or clients to know where you’re operating from. In many businesses, your actual location no longer matters.
Many types of business can operate from home. For example:
As this list demonstrates, a home office offers a low-cost way of trialling your business concept. Many of these businesses (such as a catering business started from a home kitchen) will have to move into commercial premises if the business grows.
In normal circumstances, some businesses can’t be run from home. Given the current requirements with COVID-19, there may be no choice.
Home-based businesses also often have to comply with particular state, territory and local government regulations. When you use your home as a place of business, specific regulations may apply to the impact of your business activities on the surrounding residential area, such as pollution, energy use and parking. Depending on your type of business, you may need special permits relating to zoning, signage, noise levels or health issues.
Also check your lease if you’re renting. There might be restrictions you were not aware of. For example:
Some people continue to thrive in home businesses, others do eventually need to get out of a home office to change their mindset and convince themselves that they own a ‘real’ business. Many people experience a rise in the level of professionalism they personally feel and hence are able to project to the market when they move into conventional offices.
The move can spark a real growth phase for the business. It all depends, of course on you and your attitude.
There is a widespread myth that home offices offer significant tax advantages. In fact there is no difference in principle between deductions available to home office businesses and those available to businesses in conventional offices. In general terms, you can deduct all expenses directly related to generating your business income. The only real difference with a home office is that you have to work out how much of the home is used as an office (or how often it is used as an office).
A common way to do this is to work out the size of your office as a percentage of your house. For example, if the office occupies 10% of the floor space of the home, then you would generally be able to deduct 10% of the council rates (if you own the house) as a business expense. In the case of electricity costs (keeping the office warm in winter and cool in summer) you might feel that the office consumes more than 10% of your home electricity bill (particularly if significantly higher home power bills prove this). In this case you can get advice from your us about what might be an acceptable deduction (say 30%).
Speak to your insurance broker or agent about possible insurance changes or extra cover on office equipment used at home. Home contents type insurance policies often don’t cover equipment used for business purposes. If you’d like to chat, we can give you more detailed advice about how and what you can deduct as legitimate home office expenses.
Succeeding in a home office does take some extra discipline and adaptation. Remember you’re part of a good tradition. Successful multinational corporations have been started in suburban garages: Apple Computers and Hewlett-Packard are just two examples. If your business grows you too will probably have to move someday. In the meantime, enjoy the benefits of working in a home office and remember to reward yourself regularly for your achievements.
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