Can you claim home insurance on taxes?

According to the ATO, a home-based business is where you run your business at home (e.g. a dressmaker who does all their work at home, with clients coming to their home for fittings) or from home (e.g. a tiler who does all their work on clients' premises, but does all their record keeping and stores all their tools and supplies at home), and have a room or space set aside exclusively for business activities. 

Running a home-based business isn’t the same as working from home, though you may be able to claim some similar tax deductions.

According to the ATO, if you operate some or all of your business from home, you may be able to claim home-based business expenses as tax deductions. These may include:

• occupancy expenses (e.g. mortgage interest or rent, council rates, land taxes, house insurance premiums)
• running expenses (e.g. electricity, phone, decline in value of plant and equipment, furniture and furnishing repairs, cleaning)
• travel expenses for business trips between your home and other locations

You likely won’t be able to claim the full cost of your home insurance or other home expenses as a tax deduction; only the portion that is devoted to business use. For example, if you have a home office, you may be able to deduct the percentage of expenses that were allocated to the home office. You usually calculate occupancy expenses based on the proportion of the floor area of your home that is a place of business and the proportion of the year it was used for business.

Remember that while any office, garage, or other free-standing structure devoted to your business is eligible for the deduction as long as it is your primary place from where you operate your business, not every room that has a desk is considered as an office.

You can only claim occupancy expenses (such as home insurance) if the area of your house set aside for your business has the characteristics of a ‘place of business’ such as:

• clearly identifiable as a place of business (such as a sign at the front of your house)
• not easily suitable or adaptable for private or domestic use
• used exclusively or almost exclusively for your business
• used regularly for business visits by your clients.

The same rules apply if most of your business is conducted online.

You also won’t be able to guess or estimate your home business expenses. The ATO requires that you keep records for at least five years to show that your business incurred the expenses and how you calculate your claim.

This includes written evidence, tax invoices or receipts for:

• purchase and repairs of equipment, furniture and furnishings used for your business
• utility bills and cleaning expenses
• mortgage interest, rent, insurance and council rates (if you claim occupancy expenses)
• rental contract between homeowner and business (if you claim occupancy expenses)
• how you separate your business and private use (for example, a diary over a representative 4-week period or records of how you calculated the percentage of your floor plan dedicated to your business).

Because rules and regulations around taxation and claiming business expenses as deductions can be complex and may be updated frequently, you may want to check with the ATO and/or a qualified tax accountant before you consider claiming part of your home insurance on your taxes.