What you need to know when Starting a Home-Based Business

When you’re starting any business there are many issues to consider. There are those which apply generally to starting a business in Australia. In addition, people intending to use their home as a place of business often have to comply with particular state, territory and local government regulations. These regulations often address the impact your business activities may have on the surrounding area such as pollution, energy use or parking.

Some issues you need to consider are:

• council approval – zoning, signage, health issues
• home mortgage and rental agreement restrictions
• insurance – ensure you have the correct level to protect yourself
• financial management – arranging finance and setting up systems
• taxation – Capital Gains Tax, deductions for expenses
• location – zoning and redevelopment
• set up – separate your work space from the rest of your home.

Planning

A successful home business requires an owner who is able to handle a wide variety of issues. In many cases, identical home-based businesses can have different levels of success due to different approaches to planning. By thinking through the establishment of your business carefully and taking the time to research and plan your operations, you can create a competitive advantage while also helping secure the future of your business.

If you’re starting a home business, developing a thorough business plan is the best place to begin. Don’t be afraid to ask yourself hard questions about your business. It’s much easier to plan for the future than to react to the unexpected.

Registration & Licences

Like all businesses, home-based businesses need to register for business and company names, taxation, and other business licences and permits. Using your home as a place of business may also mean complying with particular state, territory and local government regulations.

The impact of your business activities on the surrouding residential area, particularly pollution, energy use and parking, can all require special permission. Depending on your type of business, you may need special permits relating to zoning, signage, noise levels or health issues.

As well as government regulations, many industries have developed their own codes of practice and standards of conduct that may apply to the way your business sells to customers. Some codes are mandatory under fair trading law, while others are a voluntary form of industry self-regulation.

See the Registration & licences topic on the business.gov.au website for information about registration for all businesses. You will also need to contact your local council to find out what licences and restrictions apply to your home-based business.

Taxation

As with any new business, there are a number of tax obligations to comply with when starting up. You may need to register for a Tax File Number, Australian Business Number, Goods and Services Tax, Pay As You Go withholding and Fringe Benefits Tax. You may also be eligible to receive small business entity concessions.

If you run a home-based business there are also specific tax issues you should know about, in particular, what expenses you can claim and whether you have to pay capital gains tax when you sell your home.

Read about home-based business essentials from the Australian Taxation Office (ATO) home-based work webpage.

Insurance

As a home-based business you need to make sure you have the correct level of insurance to protect yourself, your business and your home. It’s also important to understand that standard homeowner policies do not generally provide cover for home-based business activities.

When looking at insurance providers, consider the following types of insurance:

• public liability cover for persons visiting your business at home (e.g. customers and suppliers)
• insurance of business equipment, inventory, tools of trade, office furniture or computer equipment
• workers’ compensation for any employees working from your home
• fire, storm and theft cover for the loss of any stock and equipment
• professional indemnity insurance if you’re in a service industry, especially if you’re contracting to government
• loss of income due to personal accident or illness
• costs arising from interruption to your business
• marine policy if you send products via freight carriers or post.

It’s important to note that many policies don’t cover tools of trade, office furniture or computer equipment used for your business, unless you’ve specifically advised your insurer and they’ve agreed to cover you.

Compare insurance companies and brokers by searching the business.gov.au directory for links to insurance and broker associations, or check the phone book. You can also contact your industry association or professional body to find out if they can help.

Advice & Assistance

There is a wide range of government assistance is available to new home-based businesses:

• To find grants and assistance that you may be eligible for, use the Grants & Assistance Finder at the business.gov.au website.
• Locate your nearest advisory service using Advisor Finder.
• See the Events calendar for networking events being held near you.
• See what home-based business assistance is available in your state and territory.

You may also wish to seek the assistance of a solicitor, accountant or business adviser.

This information is brought to you by business.gov.au