Home-based businesses

A home-based business is one where your home is also your principal place of business.

Common types of home-based businesses include:

• ecommerce (selling products or services online)
• freelancing (such as graphic design, writing or marketing)
• consulting and advisory
• virtual assistance
• tutoring and coaching
• pet grooming, sitting or walking
• content creation
• home cooking or catering
• health and wellness (such as yoga classes or beauty treatments)
• handmade goods or crafts.

Starting a home-based business is like starting any other business. You will need business and tax registrations.

You may also need:

• licences or permits
• landlord approval (if you rent your home)
• council approval.

To comply with the law, your business needs certain registrations. If you don’t have the right ones, you may need to pay penalties or fines.

The registrations you need will depend on things like:

• your business structure
• your state or territory
• the products or services you sell
• whether you employ people.

Most businesses need:

• an Australian Business Number (ABN)
• a tax file number (TFN)
• a company registration (if they use that business structure)
• a registered business name
• tax registrations.

You may need licences or permits to run your business. It depends on your business type, activities and location.

Licences and permits either:

• approve your business to do an activity
• help protect your business and employees.

Check the rules in your lease. Many residential lease agreements say that tenants can’t use the property for commercial activities.

Notify your landlord about your business. They might be happy to update the terms of your lease. They will also need to make sure that your business does not void their property insurance.

Depending on the nature of your business and its impact on your residential area, you may need approval from your local government or council. For example, if:

• regular visits from clients or suppliers will create more vehicle traffic
• you will employ other people (generally more than 2) to work from your home
• you plan to install signs outside your home
• you need to modify your home for your business
• your business will create noise, fumes or vibrations that could disturb neighbours
• your business will produce significant waste or use high levels of water, electricity or gas
• your business involves activities that pose potential health and safety risks (for example, food preparation or childcare).

Contact your local government or council and ask about their rules for your business.

You need insurance to protect your business. The insurance depends on the type of work you do. For example, you may need public liability insurance if you have clients that come to your home.

Standard home insurance policies often do not cover business activities. If you’re running any part of your business from a home you own, tell your home insurer and check your cover.

If you have a space set aside only for business activities, you can claim expenses to reduce your taxable income.

These may include:

• occupancy expenses (such as mortgage interest or rent, council rates, land taxes and house insurance premiums)
• running expenses (such as electricity, phone, decline in value of plant and equipment, furniture and furnishing repairs and cleaning)
• the cost of driving between your home and other locations, if the travel is for business purposes.

Businesses often use their principal place of business as their postal address. But you can use a post office box or virtual office service instead for convenience or privacy. This can be a good idea if you run your business from home and don’t want to give out your home address.

When you start a home-based business, it can be difficult to balance your work and home life. It’s important to set boundaries for your health and wellbeing.

Some tips to consider:

• Create a physical space for work. A room with a door you can close is ideal.
• Don’t work in your personal spaces (for example, don’t use your work laptop in bed or on the couch).
• Have set hours you work each weekday.
• Don’t check your emails before or after you finish work.
• Schedule regular breaks.
• Plan holidays or time off in advance.
• On the weekend or when you have time off, put your laptop away.

If you used any part of your home for business purposes, you may have to pay capital gains tax (CGT). Learn more about CGT for home-based businesses on the ATO website.

There’s help available for your business.

• Talk to a business adviser online, over the phone or face-to-face.
• Find experts and services to help you with your business finances.
• Search for government grants, funding and support programs.
• Improve your business skills, learn about grants or grow your network through events and training.
• Get immediate and long-term mental health support for business owners.