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Are you a home based business?
Home based businesses are defined as businesses that have no fixed business address other than the home, although business activity may or may not occur at that location.
The importance of home based businesses
All levels of Government support and acknowledge that home based business is the highest growth area of small business, with the number of these businesses growing 24% between 1999 and 2001 in SA. This represents 13% higher growth than other small businesses. A recent research survey in the Northern region showed home based business was the largest employer group, and included
substantial businesses with 11% generating revenues in excess of $500,000.
This issue will become more significant, given high growth in the number of home based businesses and the reality that recent research found the average age of the business to be 10 years. More than 90% of surveyed businesses were not intending to move the business out of their home.
The use of this guide
This guide is designed to help home based businesses establish themselves as viable, sustainable and successful businesses. It provides basic information about the critical issues important to home based business, with contact details for the next steps to address these issues.
Any information in this guide is not advice for a specific business or situation. In every instance prospective or current business owners should seek further information and advice relevant to their needs.
The information in this guide is correct at the time of publication but details regularly change and users may find that some contact details will alter.
The home based business may be Art, craft and design
Trades, building and construction Business and property services Personal services
Consultants and contractors Professionals
Family day care Food and catering
Tourism and home accommodation Franchisees
Licences, Registration & Approvals
Business Licences
Some types of small businesses require licences, permits or approvals for their operation. The need for these approvals is dependant on the nature of their operation and the regulations of their industry. The Business Licence Information Service has up to date information regarding the requirements for Australian, State and Local Government Departments. This free service is accessed through Business Enterprise Centres, Regional Development Boards and the Department of Trade and Economic Development. (see details at the end of this guide)
To find out what is required for your business, simply advise the nature of the business to the above organisations. They will provide a print out, including actual licence forms.
Once you have obtained information about the licence required, you must submit applications and fees directly with the department or agency nominated. For occupational licensing (plumbers, builders, travel agents etc) you will need to contact The Office of Consumer and Business Affairs. (see contact details at the end of this guide)
Business Name Registration
Under The Business Names Act, you are required to register any trading name for your business that is not your own name. The purpose of registration is to provide a public register that identifies persons operating a business. It is not for the purpose of protecting names or conferring rights to use names.
It is an offence under the Act to operate a business under a name that is not registered.
The registration of business names is administered by the Office of Consumer and Business Affairs, or OCBA (see details at the end of this guide).
Before applying to register a business name, you can check availability with OCBA. Registration of a business name is generally for 3 years and is then renewed every 3 years. There is also a fee involved with registering a business name.
Taxation Issues and home based business
The following is a brief overview of taxation information pertinent to home based business. For more details, please refer to the Australian Taxation Office (ATO) publication “Tax and the home-based business” (product ID NAT 10709-03.2004) available at any ATO office or Australian Government bookshop.
Home Based Business Issues
Ensure that you are running a business, and not just a hobby. Taxation issues do not apply if you are conducting a hobby – seek advice from the ATO regarding this
determination.
If you are in business, a home based
business is generally entitled to claim similar expenses to other businesses. There are 2 types of expenses relating directly to home based business:
1. expenses relating to the area of your home used for business, and
2. travel expenses between your home and business
The first category includes:
Occupancy expenses such as rent,
mortgage, interest, house insurance, rates, and
Running expenses such as electricity, gas, cleaning and office furnishings.
Calculations for these expenses are demonstrated on the next page.
For travel expenses, a business may be able to claim costs of trips from home for
business purposes if the home is the principal place of business or you have an area of your home set aside exclusively for business.
General Business Tax Issues
All businesses need to register for an Australian Business Number (ABN).
Businesses may also need to register for tax obligations, including a tax file number (TFN), good and services tax (GST), pay as you go (PAYG) withholding and fringe benefits tax (FBT).
As with other businesses, home based business tax obligations may include: • Income tax
• Goods and Services Tax (GST) • PAYG withholding
• Superannuation for employees • Submitting reporting and payments,
such as Business Activity Statements, Income Tax Returns • Capital Gains Tax (see the next
page)
Home based businesses have the same record keeping requirements as other businesses.
It is recommended that any home based businesses seek advice and assistance from the ATO or a tax professional to ensure compliance with all taxation requirements.
What expenses can I claim?
You may be able to claim the following expenses:
What you can claim Home is your principal place of business and you have a home work area
Home is not your principal place of business but you have a home work area
You work at home but don’t have a home work area
Occupancy Expenses
Cost of owning or renting the house (rent, mortgage, interest, insurance, rates)
Yes No No
Running Expenses
Cost of using a room (gas, power) Business phone costs
Decline in value of office equipment (desks, chairs, computers)
Decline in value of curtains, carpets, lighting, etc. Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No
This table has been reproduced from the Australian Taxation Office publication “Tax and the home based business”.
For further information about home business tax obligations and the calculation of expenses as allowable deductions, please refer to the Australian Taxation Office (ATO) publication “Tax and the home-based business” (product ID NAT 10709-03.2004) available at any ATO office or Australian Government bookshop.
Capital gains tax issues
Generally, there are no capital gains tax implications when you sell your main residence. However, you may have capital gains tax obligations when you sell your main residence if you have used any part of your home to produce income.
For home based business, this means that there may be capital gains tax implications on the sale of your main residence if:
• your home is your principal place of business, and
• you have a home work area set aside exclusively for business use and is clearly identifiable as such (for example, a doctor’s surgery located in a doctor’s home)
The ATO has an information sheet titled “Main Residence Exemption – the effect of using your home to produce income while still living in it”, that contains further details about calculation of this tax. If there are capital gains tax implications regarding the sale of your home or your business, it is strongly recommended you seek advice from the ATO or from a tax professional.
Local Councils – Their role with home based businesses
All councils have the role of planning for future development in their area and the role of the
development process authority. Thus, councils need to be informed of home based business activity to assist in their duties with these two roles.
Can You Operate a Business From Home?
You can operate a small scale business from your home, provided it does not detract from the enjoyment of the area for your neighbours and it complies with State legislation, particularly the Development Regulation’s definition of “home activity”.
Is a Council Application Necessary?
No approvals are required under the Development Act if the home based business fully complies with the criteria established by the definition of a “home activity” in the Development Act.
However, other legislation may need to be considered depending on the type of business and the nature of its operations. For example, a food preparation business, a business involving the use and storage of hazardous chemicals, or a business that uses more than 10% of the home’s floor-space as a dedicated work area.
Internal structural modifications that would be defined as “building works” will require a building approval even if a development application is not required.
Regardless of whether a planning approval is required or not, all home based businesses that employ staff have all the obligations of other employers, including the requirement to provide a safe work environment and to meet the requirements of the Disability Discrimination Act 1992. The Productivity Commission has found the cost of complying with the DDA should be quite small for many
organisations.
Council can advise you in respect to these issues.
What Sort of Activity Can Cause a Problem?
Please keep in mind that a “home activity” should not create a problem for your neighbours. Council often receives complaints from residents about activities which:
• create repeated, prolonged or loud noise;
• increase traffic in the street with delivery vehicles or customer car parking; • produce smoke, smells, fumes, dust, etc; and
• operate outside normal working hours (eg in the range of 9 am – 5 pm for some activities which may have noise or traffic implications).
Mechanical repairs, panel beating, spray-painting, and activities which involve noisy machinery do not generally fit into the definition of a “home activity”.
You must at all times operate within the above guidelines to be considered a “home activity”. If you cannot comply with these requirements, you will need to look at non-residential premises to establish your business, or speak to Council’s planning officers to consider preparing and lodging a
What’s an Appropriate Home Business / Home Activity?
A home business / home activity must comply with the following home activity criteria:
Home Activity Definition What it may mean?
A business that does not detrimentally affect the amenity of the locality or any part of the locality
For instance:
• Vehicle traffic to and from the house, or parking, should not exceed that which could ordinarily be expected from a private home
• the parking of the vehicles, as a result of the activity, should not unreasonably exceed that which could ordinarily be expected from a private home
• noise generated by the activity and/or fumes emitted should not unreasonably exceed that which could ordinarily be expected from a private home
A business that does not require or involve any of the following:
• assistance by more than one person who is not resident in the dwelling
• use (even if temporarily or permanently) of a floor area exceeding 30 square metres
• the imposition on the services provided by any public utility organization of any demand or load greater than that which is ordinarily imposed by other users of that service in the locality
• the display of goods in a window or about the dwelling or its curtilage
• the use of a vehicle exceeding three tonne tare in weight
• For instance, several residents of the home can be employed by the home activity definition, but only one non-resident
• This requirement relates to “floor area” in the home, rather than the area external to the dwelling
• For instance, not overloading the local electricity supply network. Some food related activities may require the installation of a grease trap involving approval by SA Water’s Trade Waste. • Do not display goods related to the home
activity outside or within the home which could be construed as a public display • Ensure the property of the home activity
does not contain a vehicle exceeding three tonne tare in weight
In addition to Schedule 1 of the Development Regulations, Councils would normally need to consider Schedule 3 – Acts and Activities which are not Development, in particular Clause 1 relating to Advertising Displays. The following type of advertising display does not require a Development Application.
Advertising Display What does this mean?
1. The commencement of an advertising display containing an advertisement:
a) (not applicable) b) (not applicable)
c) that is on enclosed land or within a building and is not readily visible from land outside the enclosure or the building; or
d) that is display for the purpose of
identification, direction, warning or other information in relation to a detached, semi-detached, row or multiple dwelling or residential flat building, subject to the following conditions:
I. that the advertisement area is not more than 0.2 square metres; and II. that the advertising display-
A. does not move; and B. does not flash; and C. does not reflect light so
as to be an undue distraction to motorists; and
D. is not internally illuminated; and III. that not more than two such
advertisements are displayed in relation to the same building.
Advertising displays (eg signs) less than 0.2 metres that comply with the mentioned criteria are not deemed to be development and therefore, do not require approval. This is consistent with the requirement of the home activity definition. Larger advertising displays (including name plate signs) which do not comply with the mentioned criteria would require Development Approval by Council.
Activities Involving Food
If you intend to establish a business which involves the preparation, transportation or storage of food for sale, you will be required to seek a separate approval from the Council’s Environmental Health Department.
Activities Involving Storage and Use of Hazardous Chemicals
If you are using and storing hazardous chemicals, you will need to comply with the Dangerous Substances Act 1979 and Regulations which specify the license requirements for business. For specified substances the Australian Standards apply. For more details you can access the regulations on www.safework.sa.gov.au or contact your local Council and speak to an Environmental Health Officer.
What if Your Neighbour Complains to Council?
Council recognises that many residents become concerned about home business as they believe any business is prohibited. Council is often called upon to explain to neighbours and other local residents that small scale home businesses are both legitimate and encouraged in residential areas provided that they don’t cause actual detriment to neighbours’ residential lifestyle.
Ideally you will have advised your neighbours that the home business operates with Council’s knowledge as a home activity, or has been approved by Council.
In practical terms, Council will consider whether the impact is any worse than that typically associated with residential activity, such as:
• operating personal office equipment (computers, fax machines); or • operating small power tools; or
• preparing meals; or
• growing flowers or vegetables.
If Council believes from the complaint that you may be adversely affecting a neighbours’ quality of life in respect to the residential character and ambiance of their neighbourhood through operating the home activity, Council will indicate whether you need to modify the operation to conform to the home activity definition, or whether you need to make a development application for an expanded or different operation.
What Happens if I can’t Comply with the Home Activity Definitions?
If any of the home activity criteria are not met, then you are operating outside of the Development Regulations’ definition of home activity, therefore the activity may be regarded as “development” in its own right and not something that is ancillary to the residential use of the land.
In this event, a formal Development Application would have to be made to the Council for assessment under the provisions of the Development Act and associated Development Plan. Council’s processing of such an application may involve giving public notice to neighbors. Council has the right to approve (usually with conditions), defer or refuse your Development Application.
Useful Information & Support can be found at…
BUSINESS LICENSING
OFFICE OF CONSUMER AND BUSINESS AFFAIRS (Occupational licensing)
Business and Occupational Services Level 3 Chesser House
91 – 97 Grenfell Street Adelaide SA 5000
Builders: 8204 9644
Plumbers, Gas Fitters and Electricians: 8204 9696 Security and Investigation Agents: 8204 9686
Land Agents: 8204 9686
Conveyancers: 8204 9686 Second hand Vehicle Dealers: 8204 9686
Travel Agents: 8204 9686
SA Country Callers: 13 18 82
Website: www.ocba.sa.gov.au
BUSINESS REGISTRATION
OFFICE OF CONSUMER AND BUSINESS AFFAIRS Business Name Registry
Ground Floor, Chesser House
91 – 97 Grenfell Street Adelaide SA 5000 Telephone: 1300 138 918 Website: www.ocba.sa.gov.au
CORPORATIONS
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Level 8, 100 Pirie Street, Adelaide SA 5000
Info line: 1300 300 630 Website: www.asic.gov.au
**Information available on company obligations, directors’ duties, risk management, investment and other general tips for small business.
EMPLOYMENT (laws, awards, acts) EQUAL OPPORTUNITY COMMISSION Level 2, 45 Pirie Street, Adelaide SA 5000 Telephone: 8207 1977 Freecall: 1800 188 163
TTY: 8207 1911 (callers with hearing or speech impairment) Website: www.eoc.sa.gov.au
SAFEWORK SA
Level 3, 1 Richmond Road Keswick SA 5035
Telephone: 1300 365 255 Mobile & Interstate: 8303 0400
Website: www.safework.sa.gov.au
**including Occupational Health & Safety, Awards and Enterprise Agreements etc
EXPORTING
AUSTRADE (Australian Trade Commission)
Ground Floor, 50 Hindmarsh Square, Adelaide SA 5000 Export Advisory Service : 13 28 78
Telephone: 8202 7811
Website: www.austrade.gov.au
AUSTRALIAN INSTITUTE OF EXPORT c/o Export Solutions
6th Floor 55 Gawler Pl, Adelaide 5000 Telephone: 82319066
Website: www.aiex.com.au
EXPORTERS CLUB North West Adelaide
Building 16, 35-37 Stirling Street, Thebarton SA 5031 Telephone: 8443 7688
Website: www.exportersclub.net Onkaparinga
209 South Rd, Morphett Vale SA 5162 Telephone: 8326 6511
Website: www.exportersclub.net
FAIR TRADING / UNCONSCIONABLE CONDUCT
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION 14th Floor, 13 Grenfell Street, Adelaide 5000
Information: 1300 302 502 Adelaide Office: 8213 3444 Website: www.accc.gov.au
OFFICE OF CONSUMER AND BUSINESS AFFAIRS Level 4, Chesser house
91 – 97 Grenfell Street, Adelaide 5000 Telephone: 8204 9777 SA Country Callers: 13 18 82
FINANCIAL ADVICE
SMALL BUSINESS EMERGENCY SERVICE Telephone: 1300 360 306
**This service operates weekdays from 9.00am to 3.00pm only (access to financial, business and emotional advice including referrals to a network of accountants and lawyers.
GENERAL
DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT Small Business Officers: 1800 188 018
General Telephone: 8303 2400
Website: www.southaustralia.biz
BUSINESS ENTERPRISE CENTRES (SA) Hotline: 13 18 91
Website: www.becsa.com.au
**Metropolitan Businesses – contact a Business Enterprise Centre nearest you
EASTSIDE BEC
31 The Parade, Norwood SA 5067 Telephone: 8132 0377
Website: www.eastsidebec.com.au
INNER SOUTHERN BEC Morphetville Racecourse
79 Morphett Rd, Morphetville SA 5043 Telephone: 8294 1181
Website: www.isbec.com.au
INNER WEST BEC
Adelaide University Research Park
Level 1, 30-32 Stirling St, Thebarton SA 5031 Telephone: 8159 8700
Website: www.bec.org.au
NORTHERN ADELAIDE BEC
95 Womma Rd, Elizabeth West SA 5113 Telephone: 8256 0910
Website: www.nabec.com.au
SOUTHERN SUCCESS BEC
5/209 South Rd, Morphett Vale SA 5162 Telephone: 8326 6511
TEA TREE GULLY BEC
571 Montague Rd, Modbury SA 5092 Telephone: 8397 7417
Website: www.becttg.sa.gov.au
WESTERN AREA BEC
6 Todd St, Port Adelaide SA 5015 Telephone: 8440 2440
Website: www.wabec.com.au
INTELLECTUAL PROPERTY / INNOVATIONS (Patents, trademarks and designs) IP AUSTRALIA
Level 10 Origin Energy House
1 King William Street, Adelaide SA 5000 Telephone: 1300 651 010
Website: www.ipaustralia.gov.au
LABELLING / QUALITY PRODUCT SAFETY STANDARDS AUSTRALIAN COMPETITION AND CONSUMER COMMISSION 14th floor, 13 Grenfell Street, Adelaide SA 5000
Information: 1300 302 502 Adelaide Office: 8213 3444 Website: www.accc.gov.au
DEPARTMENT OF HUMAN SERVICES (Food Labeling) Food Section, Environmental Health Branch
Level 2, 50 Grenfell Street, Adelaide SA 5000 Telephone: 8226 7107
Website: www.dh.sa.gov.au/pehs/food-index.htm **Also refer to your local council environmental health officer
OFFICE OF CONSUMER AND BUSINESS AFFAIRS 8 West Thebarton Road, Thebarton SA 5031
Trade Measurement: 8234 2036 Product Safety: 8152 0732 SA Country Callers: 13 18 82
Website: www.ocba.sa.gov.au
SAI Global
PREFERRED RESELLER: Standards & Technical Publications 45D Sussex Terrace, Hawthorn SA 5062
Telephone: 1300 654 646
LEGAL ADVICE
LEGAL SERVICES COMMISSION OF SA 82 – 98 Wakefield Street, Adelaide SA 5000 Advice Line: 1300 366 424
General: 8463 3555
TTY: 8463 3691 (callers with hearing or speech impairments) Website: www.lsc.sa.gov.au
www.lawhandbook.sa.gov.au
PLANNING / BUILDING / ZONING
Contact your local council, or… PLANNING SA
Roma Mitchell House
136 North Terrace, Adelaide SA 5000 Telephone: 8303 0600
Website: www.planning.sa.gov.au
RETAIL AND COMMERCIAL TENNANCY
OFFICE OF CONSUMER AND BUSINESS AFFAIRS Level 1 Chesser House
91 – 97 Grenfell Street, Adelaide SA 5000 Telephone: 8204 9533 SA Country Callers: 13 18 82
Website: www.ocba.gov.au TAXATION
AUSTRALIAN TAXATION OFFICE (Federal) 91 Waymouth Street, Adelaide SA 5000
Tax Reform Information Line: 13 24 78 (PAYG, GST, ABN, Activity Statements)
Business Information Line: 13 28 66 (Business Inquiries on accounts, lodgments & payments) A Fax from Tax: 13 28 60
Tax Basics: 1300 661 104 (Free Seminars for people who are new to business) Superannuation: 13 10 20
Excise: 1300 657 162 (Diesel fuel grants/rebates etc) Translating and interpreting Services: 13 14 50
TTY: 1800 806 215 (for people with a hearing or speech impairment)
Website: www.ato.gov.au
www.taxreform.ato.gov.au
WORKPLACE HEALTH AND SAFETY WORKCOVER CORPORATION SA 100 Waymouth Street Adelaide SA 5000 Telephone: 13 18 55
Website: www.workcover.com
SAFEWORK SA
Level 3, 1 Richmond Road Keswick SA 5035 Telephone: 1300 365 255
Mobile & Interstate: 8303 0400
