Many business owners run their business from home. What most do not realise is that if you have been claiming occupancy expenses, selling your home may not be fully tax-free. 

How the main residence exemption is affected 

If you have been claiming a portion of mortgage interest and rates as a business expense, the main residence exemption only applies partially when you sell. The business-use portion of any capital gain is not exempt. 

The calculation is based on floor area. The same percentage you used for occupancy expense claims is the percentage that falls outside the exemption. 

What does this mean for you? 

If you have a home office or a room set aside for the business and have been claiming occupancy expenses, a portion of the gain on sale will be taxable. The larger the business use percentage and the bigger the gain, the more significant the tax impact. 

There may be CGT concessions that can be applied to minimise the tax but these can be complex and need to be preplanned with your accountant.  

Key takeaway 

If you run a business from home and are thinking about selling, speak to your accountant to understand your exposure to capital gains and whether any CGT concessions are worth applying. Every situation is different. Sometimes the taxable portion of the gain is small enough that the cost of applying concessions outweighs the benefit. Other times it can make a significant difference.