Direct reimbursement of running expenses

If your home-based business is paying a direct reimbursement to the homeowner for the business portion of the running expenses, the homeowner does not report it in their tax return. The homeowner is only receiving payment to cover their out-of-pocket expenses that were incurred by running the business (for example, the extra cost of electricity due to the home-based business). The business will report these reimbursed amounts as a deduction in its tax return. 

In some situations, a person who is running their business through a company or trust structure may also be an employee of their business. If you are also an employee of the home-based business and the business reimburses you (as the homeowner) for its portion of the running costs, you do not report this in your individual tax return as this is a direct reimbursement of these expenses. The business will report the running expenses as a deduction in its tax return.

Paying for occupancy expenses

If your home-based business is run through a company or trust and is paying for occupancy expenses (for example, rent) to you:

• you will declare the amount as rental income in your individual tax return and claim the deductions in relation to that income
• your business will claim deductions for the rent in its tax return.