Starting a home business

Starting a home business

Your home can be an ideal and cost-effective place to launch your new business. It allows you to reduce initial expenses while giving you the opportunity to fine-tune your operations before transitioning to a dedicated business location.

You might operate the entire business from your house or designate a specific area, such as a home office, for your business activities.

On this page

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  Pros and Cons of Running a Home-Based Business
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  Key Factors to Consider for a Home Business
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  Checklist to Assess Your Home’s Suitability for a Business
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  Financial Planning for Your Home-Based Venture

Types of Businesses You Can Run from Home

A tradesperson managing administrative tasks and hosting client meetings from a home office.

A hairstylist or beauty therapist offering services in a home-based studio.

A consultant working from a home office while also meeting clients at their locations.

An online business conducted entirely from a home office setup.

A personal trainer or yoga instructor utilizing a home gym for sessions.

A dog grooming business with a studio set up at home.

Advantages and disadvantages of a Business from Home

Operating a business from home isn’t ideal for everyone and may not be suitable for all types of businesses. When deciding, it’s important to weigh the following factors:

Advantages

• Avoid high rental or lease costs and rigid contract terms.
• Modern technology reduces the need for a physical storefront.
• Save time by eliminating the daily commute to an office.
• Enjoy greater flexibility, such as setting your work hours or utilizing a shed or studio for your business needs.
• Potentially claim a portion of your home loan interest as a business expense.
• Take advantage of eligibility for certain tax deductions.

Disadvantages

• Potential distractions, including family members, pets, or home deliveries.
• Long or irregular working hours, which might strain relationships with family, friends, and neighbors.
• Risk of capital gains tax when selling your home.
• Limited courier or delivery services based on your home location.
• Residential property tax benefits or concessions may be impacted.

Home Business Considerations

• Distractions such as family members, household activities, pets, or deliveries.
• Reduced need for a traditional storefront due to technological advancements enabling online operations.
• Irregular or extended working hours, potentially straining relationships with family, friends, and neighbors.
• Possibility of capital gains tax implications if you sell your home.
• Limited courier or delivery services in certain areas.
• Impact on eligibility for residential property tax deductions or concessions.

When planning your home business, keep the following in mind:

Type of Home

Consider whether your business requires a dedicated workspace, such as a separate room or storage area (e.g., a garage, shed, or annex), or if a small area like a desk in a shared space will suffice. Tailor your setup to your business needs.

Location

• Will customers need to visit your home?
• Can your business operate entirely online?
• Is sufficient parking available for clients or customers?
• Are couriers and delivery personnel able to locate your address easily?

Impact on Personal Life

Operating a home business can influence your household and neighbors.

Registrations and Permits
You may need specific permits, licenses, or registrations to operate legally. Check requirements with your local council and relevant authorities. The Australian Business Licence and Information Service (ABLIS) can be a valuable tool to guide you through compliance.


Tax and Financial Considerations
Seek advice from a qualified accountant or financial adviser to understand tax obligations, concessions, and the financial implications of running a business from home. Proper planning can help you avoid unexpected complications.

Working Effectively with a Business Adviser: Key Considerations

Use this guide to determine whether a home-based business is a suitable option for you:

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  Is my home appropriate for the type of business I want to start?
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  Is there enough sDo I have a separate, quiet space for a home office, such as a room with a door?pace for a home office with a door, separate from other parts of the house?
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  Will my business activities take place in the main house, or will I use another structure (e.g., a garage, shed, studio, or salon)?
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  Is my home or any other space safe and functional for staff, if needed?
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  Are there sufficient storage facilities for materials and supplies?
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  Will I need to store potentially hazardous materials, and is my property equipped for this?
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  Can I work without being interrupted by household distractions?
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  Is my home accessible and convenient for customers or suppliers to visit?
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  Is my location easy for visitors to locate?
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  Does my property offer adequate parking for customers, staff, or delivery vehicles?
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  Will running my business create issues for my neighbors, such as noise or disturbances?
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  Could my business activities generate any pollution, such as dust, light, or waste?
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  Are courier services available to pick up from my location, and are the costs reasonable?
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  Do I have appropriate business insurance to cover customers or employees on-site?
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  If I’m renting or paying a mortgage, do I need approval from my landlord or lender to operate a business from home?
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  Can I obtain the necessary permits, licenses, and approvals from local authorities or councils?
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  Am I eligible to claim tax deductions, such as home loan interest, for operating a home business?
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  Will I be required to pay capital gains tax if I decide to sell my home in the future?

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Home Business Financial Management

To ensure the success of your home-based business and meet your financial responsibilities, it’s crucial to establish effective financial systems and processes.

It’s important to keep your personal and business finances separate. Mixing them can complicate financial reporting. Set up a dedicated business bank account and structure with the help of an accountant to maintain clarity.

Consulting a financial advisor about the right accounts, products, and services for your business is beneficial. Once you have an understanding, approach banks to inquire about their most competitive offers tailored to your business.

Home businesses may also qualify for certain tax exemptions or deductions related to the portion of your home used for business purposes. However, these deductions could have future tax consequences. Speak with your accountant to ensure all potential impacts and available options are properly considered.

Financial Planning and Record-Keeping

Effective financial planning and maintaining accurate records are essential for the success of your home-based business. Neglecting these aspects can lead to:

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  Mixing personal and business finances, causing confusion and inaccurate financial reporting.
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  Mismanagement of invoices and receipts, which can disrupt cash flow and compliance.

If your business operates under the “Steps To Business” framework and is open to the public, ensure that your registered business name is clearly displayed at all physical locations.

To secure exclusive rights to your business name and prevent others from using it, consider registering a trademark. This provides legal protection and ensures your brand remains unique.

How to Minimize Financial Risks

To manage potential financial risks effectively, consider the following steps:

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  Develop a financial plan—use business planning templates or consult a professional for expert assistance.
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  Seek advice from an accountant, bookkeeper, or tax professional to ensure compliance and accuracy.
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  Stay informed about tax updates by subscribing to small business newsletters or updates from your local tax authority.
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  Outsource financial tasks—hiring a part-time bookkeeper can help maintain accurate and up-to-date records.
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  Regularly review your financial plans, budgets, and records—this ensures you stay on track with obligations and can address issues promptly.

Additional Tax Resources

For further guidance, explore resources on topics such as:

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  Using your home for business or rental purposes.
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  Tax deductions available for home-based businesses operating as a company or trust.
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  Tax deductions applicable to sole traders or partnerships running home-based businesses.