In Short
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Council Approval: Depending on your location and business type, you may need council approval to operate from home. Check local regulations to ensure compliance.
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Tax and Insurance Obligations: Register for necessary tax identifiers like an ABN and consider insurance coverages such as public liability and professional indemnity.
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Workplace Health and Safety: Even at home, you must maintain a safe working environment. Identify potential hazards and comply with health and safety laws.
Tips for Businesses
Before starting a home-based business, research local council requirements to determine if you need approval. Ensure you register for all necessary tax obligations, such as an ABN, and consider appropriate insurance coverages to protect your business. Maintain a safe working environment by identifying and addressing potential hazards in your home workspace.
Before you begin running a business from home, legal considerations naturally arise and must be addressed to ensure your business is set up for success. Generally, a home-based business is an avenue for small business startups, independent contractors, or sole traders who operate a business from home. Moreover, a business from home can be the base for a business, the place of business, the home office of a consultant or contractor where clients visit the premises, or the base for an online business. This article will explore some key issues to consider before you begin your home business.
What Is a Home Business?
A home business is a business carried on in a dwelling (a home) or ancillary to a dwelling (a garage or studio). It is a business where your home is also your principal place of business. When you commence your home-based business, ensure that you have a dedicated area and scheduled business hours for your work to be carried out to maintain a work-life balance.
Similar to other businesses in Australia, a home business must register for a business name, pay tax to the ATO, and comply with the relevant local requirements and any requirements that arise from the type of business being conducted.
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Do I Need Council Approval to Run a Business From Home?
Running a business from your home will require certain registration and licensing based on the state, territory and local government. The necessary registrations and licences will depend on your business’s industry. It will also vary depending on the business activities you will be carrying out and the local zoning of your residential area.
Home-based businesses in Australia can often operate without local council approval under “exempt development” provisions, provided they don’t disrupt the neighbourhood’s amenities. However, entrepreneurs must adhere to the State Environmental Planning Policy (Exempt and Complying Development Codes). To qualify as exempt, a home business is limited to:
- employing no more than two non-residents;
- using less than 10% of the property for business purposes and staying within the floor area limits set by the local environmental plan;
- the business must not create disturbances such as excessive noise, odours, or traffic, nor display unsightly materials or unauthorised signage.
A “complying development” fast-track assessment or a full development application may be necessary for businesses that don’t meet these criteria. This applies to ventures like food production or bed and breakfast accommodations.
The relevant state or territory where the business is being conducted will have certain requirements for operating your home business without Council approval.
Most states and territories have downloadable home-based business fact sheets that provide answers to frequently asked questions relevant to your business location.
Continue reading this article below the formWhat Are the Tax and Insurance Requirements?
Tax Requirements
You will need to consider several tax obligations when starting a home business. You may need to register for:
- Tax File Number (TFN);
- Australian Business Number (ABN);
- Goods and Services Tax (GST);
- Pay As You Go (PAYG) withholding; and
- Fringe Benefits Tax (FBT).
Running a home-based business may give rise to the above tax obligations. For example, selling your house may give rise to a capital gains tax event, and you will need to know what expenses you can and can’t claim when working from home.
Can I Hire Employees?
When your home-based business begins to grow, hiring employees can be a crucial step towards expansion and increased productivity. However, it’s important to navigate this process carefully, considering legal and practical aspects. First, ensure your home is suitable for additional workers, taking into account space constraints and zoning regulations. Be mindful of your legal obligations as an employer, including fair work practices, superannuation, and workplace health and safety standards. Consider starting with part-time or remote workers to ease the transition and minimise disruption to your home life. When selecting potential candidates, look for individuals who are self-motivated and comfortable working in a less traditional environment.
Remember, bringing employees into your home-based business affects your operations and your personal life, so it’s crucial to strike a balance that works for everyone involved.
Insurance Requirements
Running a business based on your home is no different than running a business on other premises, like an office. Depending on the type of business you will be conducting, you may need to insure your business for:
- public liability;
- professional indemnity; and
- product liability.
Workplace Health and Safety Regulations
Employers have obligations under workplace health and safety laws, even in a home-based setting. Identify and address potential hazards to ensure a safe working environment for yourself and any employees.
Homes and living arrangements vary, and so do the risks. What you need to do to manage risks is also likely to vary. Working from home may not always be practical or suit all types of work or workers. If you cannot meet your WHS duties, you are not required to allow workers to work from home.
As someone who operates a business from home, you have a primary duty of care to ensure a safe and healthy working environment. You must provide and maintain a workspace without health and safety risks. This includes:
- making sure all equipment and structures are safe;
- establishing safe systems of work;
- ensuring the safe use, handling, and storage of equipment and materials; and
- provide adequate facilities for the welfare of workers and ensure they have access to these amenities.
You are responsible for providing the necessary information, training, instruction, or supervision to protect everyone from health and safety risks associated with your business activities.
What Are My Future Plans to Expand My Business?
When deciding if running a home business is a long-term plan, you must consider your future plans. You will also need to address whether you have assets. This can include tangible and intangible assets that you want to protect.
If you choose to operate as a sole trader and wish to restructure in the future, the process is quite simple. However, it may attract large tax implications, such as triggering a capital gains tax event. We advise that you seek advice from our tax lawyers or your tax accountant.
Furthermore, when deciding whether to run a business from home, you may decide to run a company or dual company structure to mitigate risks and reduce liability.
Key Takeaways
Before deciding whether to run a home business, you should consider the following issues that give rise to legal considerations:
- whether council approval is required for the running the type of business in the specific residential area;
- the tax implications of running a business from home;
- the insurance(s) that are needed for running the type of business from home; and
- the plans to expand the business in the future, and the best business structure for your business.
If you have further questions about running a business from home, our experienced business structuring lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Generally, home-based businesses are sole proprietorships. However, this is dependent on you. If you wish to pursue your business venture as a partnership, you can do so.
A sole trader is an individual who is wholly responsible for the business in terms of ownership and finances. This individual has full control over the business and, therefore, can make decisions on behalf of the business.
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