For A Lot Of Us, Home Is Where The Office Is
Sydney Morning Herald
Tuesday March 5, 1996
Operating a business from home has proved the answer for many workers. But there are pitfalls in adding a home office. DAVID TRIBE reports.
WHAT have accountants and other business consultants, general practitioners and other professionals, representatives and researchers, artists and crafts people, contractors and executives in common? Many of them work wholly or partly at home.
This can be rewarding but there are steps to take and pitfalls to avoid.
Practitioners of the arts and the older professions have traditionally worked from home. It's here that inventors and entrepreneurs establish the viability of bright ideas before launching themselves into the wider world, and teachers and barristers prepare work to be presented outside.
Now these groups are joined by enterprising retrenchees and early retirees needing part-time jobs who are finding temporary or permanent work at home.
While many workers still prefer the stimulus of a large workplace or the "professional" ambience of a small suite in a commercial complex, growing numbers are, through telecommuting, choosing the convenience and lower costs of home - especially now that isolation has been reduced by phone and fax, personal computer and modem.
The latest figures available from the Australian Bureau of Statistics are found in Persons Employed at Home, Australia (March 1992). This records 2,037,400 people working some hours and 308,000 most hours at home. Telstra, BIS Shrapnel, estate agents and anecdotal evidence all confirm that these numbers are growing.
Of course, working at home demands discipline. Unless you live alone you must erect physical barriers and "Chinese walls" to keep the business separate from your domestic space, if only to preserve client confidentiality and confidence.
Even if you live alone and have no clients calling, business and domesticity must have their own psychological space, with strict time schedules and attitudes.
The executive director of the Melbourne consulting firm Finmark Australia, Mr Frank Kopciewicz, says: "It's not unknown for people to dress up and walk round the block to psych themselves up before returning to their home office."
Finmark conducted research on working from home for First National Real Estate. Reported in the co-operative's Property Watch late last year, this research showed that the demand for homes containing work facilities should continue growing, especially in Sydney. Some 66 per cent of FN's NSW agents and 75 per cent of Sydney agents have noticed the trend, while 81 and 90 per cent respectively are projecting an increased demand.
Mr Brett Harrod, who is the principal of FN Blacktown and both a national and an NSW FN director, observes: "The reason people are working from home is that it's a great way of cutting costs. And it's feasible because technology has changed the way we do business." Though he has three fully equipped offices away from home, he still does most of his paperwork there.
For business people starting out, mobile phones and home answering machines allow efficient functioning without an external office. Mr Harrod estimates that you'd save $20,000 on average (depending on locality) a year on rental and if you added staff and other overheads the total savings would be about $100,000. That's a lot of fees, royalties or commissions.
What are the essential requirements of a home office? According to Mr Harrod, "basically an adequate area to get away from the rest of the family - a third or fourth 'bedroom' with a door.
"The majority of people don't need face-to-face business contacts at home," he says. "But if clients call, you need accommodation with a separate entrance."
All the experts stress, however, that a home with an office is basically a home whose value chiefly depends on that of other homes in your street.
It's important not to overcapitalise on your site by extravagant house extension. And it's important not to marginalise your property: that is, add architectural features, fixtures or fittings appropriate to an office but obviously inappropriate in a home.
All a home office requires at present is a sufficient number of power points, with appropriate modification to your power-box, and a second line on your existing phone number.
A separate business number, ample off-street parking and an intercom with the rest of the house could be advantages, and a cable connection may become a necessity.
But an adapted third or fourth bedroom should be able to revert without modification to its original use, and a segregated office suite should be capable of functioning as a teenage retreat, granny flat or dual occupancy.
As for equipment, Mr Kopciewicz says $5,000-$10,000 for phone, fax, answering machine, PC and filing cabinets should suffice.
In Victoria, he says, the major barrier to creating a home office is the local authority. "Some councils have been ruthless about closing down small businesses that don't fall within standing guidelines."
NSW councils appear to be more realistic, but you should be aware of possible complexities when, as in Victoria, "practices are as plentiful as there are local authorities".
The Department of Local Government says council authority in this area stems not from the Local Government Act but from the Environmental Planning and Assessment Act 1979, administered by the Department of Urban Affairs and Planning. Essentially, it's a question of town planning and zoning provisions under a local environment plan.
Everyone knows that major changes to a dwelling require development and building approval but less is known of the way councils may seek to regulate what you do inside it.
Clearly, you'd expect to seek permission - which would probably mean refusal - to register a building in a residential suburb under the Factories, Shops and Industries Act 1962. Similarly with any noisy or noxious backyard activity.
But consent is also required if you wish to employ people at home other than the residents, display or sell goods, or exhibit any notice other than a nameplate. Even if your business involves none of these activities, it's still a "home occupation" under EPA Model Provisions.
Each council spells out whether such occupation is permissible with or without consent. A departmental officer comments: "In a lot of cases people are probably carrying out home businesses without development consent and not bothering neighbours. Councils are unlikely to take any action."
Insurance is another concern easily overlooked. Home contents insurance should cover public liability but it may not cover "business" equipment.
Additionally, you may need professional indemnity insurance and trauma, disability income, key person and death cover.
Taxation is, as usual, an inevitable consideration. You can claim against income a percentage of all outgoings on your home - council and water rates, heating and lighting, land tax (if any), telephone calls (but usually not phone rental) - by measuring the area of your home office as a proportion of the total area of your home.
However, be aware that if you do this, that portion will be subject to capital gains tax when you sell a property acquired after September 19, 1985.
If you don't have a designated space but still work at home, you can deduct a percentage of heating, lighting and telephone bills, but not the other expenses.
© 1996 Sydney Morning Herald
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