Optimum tax set up for self-employed

[Bloop Bloop]

I think this is the optimal tax set up for me as a self-employed professional services worker but I was hoping that someone who is clever could provide input on whether any of my reasoning is wrong?

Here's what I plan to do (some of these steps are already in place, but some are not)

1. Set up a spare bedroom in my PPOR as a dedicated home office, work from there 51% of the time so that it's my principal place of work
2. Since I need to have conferences with clients in the city, store work files, and attend business events etc, I am obliged to rent office space in the CBD, but I rent a modest room to minimise the expense
3. I either take public transport or drive into work - truth be told, my car is mainly a weekend toy, and I plan to keep it that way, so mostly I take PT. But when I do drive into work, that "commuting" counts as business use since I'm driving from my principal office to a secondary office.

The tax effects of this are:
- All CBD office related expenses are fully deductible
- All home office expenses including running costs, furniture depreciation and mortgage costs are pro rata deductible according to floor space (assuming the study is 100% used by me for work, which it is)
- Most of my vehicle related expenses are deductible according to the logbook method, since most of my driving (including my commute) now counts as business use.

In other words, I have transferred a chunk of my natural private costs (home/car) into deductible expenses. At the same time, I have a simple non-Part IVA reason as to why I would have this set up (doing so allows me to avoid a commute 3 days a week, allows me to make use of my unused spare bedroom, and there is a roughly 50/50 split of work that can be done from home versus work that requires conferencing in town).

What do you guys think?

[marty998]

What happens when your business grows and you need to employ staff. Will they work out of your spare bedroom too?

Do you handle all your admin yourself? At some point you might need a receptionist / secretary / executive assistant?

[Bloop Bloop]

Hi Marty, I have some admin staff who work out of the city and are basically autonomous. I can call or email them if anything needs to be done and it's only once or twice a week that I need to attend in person.

[mrmoonymartian]

If you don't want to increase your supply when demand increases you can put your prices up to maintain equilibrium. Starting with the most annoying clients.

First it was production lines, then vehicle drivers. Now autonomous admin staff are taking our office jobs.

[marty998]

Hi Marty, I have some admin staff who work out of the city and are basically autonomous. I can call or email them if anything needs to be done and it's only once or twice a week that I need to attend in person.

Not an expert here but if you work 51% from home but your 2(?) admin staff work 100% from a city office, doesn't that mean the tax office will see that your "business" operates or earns 83% of its income from the city office? Pretty hard to argue your principal place of business is your home office when "Bloop Bloop & Associates" signage is plastered all over the city office.

Does your PPOR become subject to partial CGT on sale as well?

[deborah]

When I was a small business, I did a couple of the free courses that the tax office runs. They are truly awesome, and the one that included home office information was incredibly good at explaining all the perks. The tax office wants you to claim as much as you can, and they continuously said that if you didn’t claim a perk, you were still going to pay the flip side when you sold the business or were paying tax. At the time, there was a limit on the amount of your home that could be claimed as a workplace, and I was using too much, so it was ineligible. Of course, you also lose your PPOR tax free capital gains for that portion of the home UNLESS you sell it after you’ve retired.

[Bloop Bloop]

Hi Marty, I have some admin staff who work out of the city and are basically autonomous. I can call or email them if anything needs to be done and it's only once or twice a week that I need to attend in person.

Not an expert here but if you work 51% from home but your 2(?) admin staff work 100% from a city office, doesn't that mean the tax office will see that your "business" operates or earns 83% of its income from the city office? Pretty hard to argue your principal place of business is your home office when "Bloop Bloop & Associates" signage is plastered all over the city office.

Does your PPOR become subject to partial CGT on sale as well?

Good point. My admin staff are not actual employees of mine - they contract, and not exclusively with me, and they don't work out of my office but in a building right next door, so I think I can argue that my business is just me since I'm the only person generating the fees. I'll have to check whether there's any Tax Determinations on this.

I would assume it would become subject to partial CGT yes.

And Deborah's suggestion about the tax course sounds good - I'll look into that, thanks!