Coworking spaces are popular with freelancers, startups, and small business owners, but can you claim the costs as a tax deduction? Are coworking spaces tax-deductible in Australia?
The answer is yes. In Australia, coworking expenses can be claimed on your tax return if they’re used for genuine business purposes. However, you must meet certain criteria and maintain proper documentation.
Let’s explore what qualifies as a coworking space tax deduction, who can claim it, and how to maximise your benefits this financial year.
What Is a Coworking Space?
A coworking space is a shared office environment where individuals or teams work independently or collaboratively. These spaces provide desks, private offices, meeting rooms, internet access, and shared amenities like kitchens and lounges.
They’re widely used by entrepreneurs, remote workers, and small businesses looking for flexibility, affordability, and a professional setting without committing to traditional leases.
What Expenses are Deductible in a Coworking Space?
Most coworking expenses that contribute directly to your business operations are eligible for tax deduction. The key is to identify what counts and avoid over-claiming.
Tax-Deductible Coworking Costs
- Desk or private office rental fees
- Meeting room bookings
- Printing and scanning services
- High-speed internet (if itemised)
- Utilities and cleaning (typically included in rent)
- Reception and mail services
Non-Deductible Expenses
- Meals and drinks purchased at the coworking site
- Personal travel not related to work
- Social events, unless directly tied to client work
Deduct only what is used for business. When in doubt, consult a tax advisor or check with your provider for itemised invoices.
Travelling
You might also be eligible for a deduction for travelling to your coworking space!
This depends on how often you travel to the coworking office, and the percentage of time spent there will also influence this.
What the ATO Says About Coworking Deductions
The Australian Taxation Office (ATO) provides detailed guidance on business deductions. According to the ATO business expenses guide, you must:
- Have an Australian Business Number (ABN)
- Use the coworking space regularly and exclusively for work
- Keep accurate records such as receipts and invoices
- Separate personal use from business use
The ATO treats coworking as similar to a commercial lease, provided you can demonstrate that the expense is incurred in the course of running your business.
For GST-registered businesses, GST on coworking invoices may also be claimable.
Who Can Claim Coworking Space Deductions?
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Not everyone is eligible, so check if you qualify for these benefits.
Self-Employed Individuals
Self-employed individuals, including independent contractors, are often eligible for tax deductions related to coworking spaces. To qualify, they must demonstrate that the coworking space is used exclusively and regularly for business purposes. This means using the space as a primary location for meeting clients, conducting work-related activities, or managing administrative tasks.
For example, a law firm might rent a desk in a shared office to meet with clients or have access to technology can be considered valid reasons for claiming these deductions.
In Summary:
- Must use the coworking space regularly and exclusively for work.
- Some examples include meeting clients, working on projects, and attending team meetings.
Limited Companies and Partnerships
Similarly, limited companies and partnerships can also claim tax deductions associated with coworking spaces. Once again, the key criterion is demonstrating that the workspace is used solely for business operations on a regular basis.
Whether you’re hosting meetings, working on contract projects, or using the shared space for team collaboration, these activities contribute to meeting the eligibility criteria for claiming tax deductions.
In Summary:
- Regular and exclusive use for business operations
- Maintain accurate usage records (invoices, receipts, payment proofs).
Businesses should maintain accurate records of their usage of the coworking space to support their claims during tax assessments. These records may include invoices from the coworking provider detailing rental payments and any additional services availed within the shared workspace.
Keep in mind that it’s best to consult with a professional if you are unsure of the specifics or speak with your coworking space provider for assistance.
As always, receipts are important.
How To Calculate Tax Deductions for Coworking Spaces
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![An infographic explaining the method on how to calculate tax deductions for coworking.]()
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Calculating the Allowable Portion of Expenses
This involves determining the percentage of time and space within the coworking area that is dedicated to conducting work-related tasks.
Important:
- Only expenses directly tied to business use are deductible.
- Clearly separate personal and business expenses with receipts.
This is generally straightforward, as most employees and businesses use coworking spaces for professional purposes only.
Example: If you rent a private desk solely for the purpose of business-related work and client/team meetings, then you can deduct the complete cost.
Note: For any other professional claims, refer to the ATO’s official website.
By maintaining detailed records of all expenses related to the use of coworking spaces, individuals can substantiate their claims when filing taxes.
These records may include receipts for membership fees, rental charges, utilities, and any other relevant costs incurred while utilising the shared workspace.
Methods for Calculating Tax Deductions
Understanding the methods available for calculating tax deductions is essential when utilising coworking spaces. Individuals can choose between two primary methods: simplified or actual expense method.
The simplified method offers a flat rate per square foot of the workspace used exclusively for business purposes, simplifying the calculation process significantly.
On the other hand, opting for the actual expense method allows individuals to deduct specific expenses associated with using a coworking space, such as rent and utility costs directly attributable to conducting business activities.
Simplified Method
- A fixed flat rate per square foot for exclusive business space.
Actual Expense Method
- Detailed deduction for exact costs, such as rent and utilities.
We recommend examining both methods to determine which one will maximise deductions.
Documenting Your Coworking Expenses
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Compliance with Documentation Requirements (Essential!)
Every country has its own rules and regulations regarding tax deductions.
Ensure you retain:
- Receipts for membership fees
- Detailed rental invoices
- Proof of regular business use
Warning: Inadequate records or odd claims could lead to deductions being disallowed.
For example, when claiming coworking deductions in the UK, it is essential to comply with HMRC guidelines. This involves keeping accurate records of all expenses related to the coworking space, including receipts and invoices.
The Australian Taxation Office (ATO) has specific guidelines on deductions for home office expenses, which can also apply to coworking spaces. It's essential to check their website for the most up-to-date information: https://www.ato.gov.au/
These documents serve as crucial evidence when submitting tax returns and claiming deductions. Without proper documentation, it can be challenging to account for coworking expenses and may lead to potential issues during tax assessments.
It's important to note that failing to adhere to documentation requirements can result in the disqualification of coworking deductions, leading to financial implications for individuals or businesses utilising these spaces.
Coworking Space vs Home Office: Tax Deduction Comparison
Still weighing up your options? Here’s a side-by-side comparison to see which option suits your tax needs best.
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Feature
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Home Office
|
Coworking Space
|
|
Setup Cost
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Low
|
Medium
|
|
Tax Deduction Complexity
|
Higher
|
Easier
|
|
Privacy
|
✓
|
✓
|
|
Utilities Deductible
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Partial
|
Included
|
|
Flexibility
|
✗
|
✓
|
Coworking is more flexible and often simpler to claim, especially if you work in a professional role that demands frequent client meetings or team access.
Common Mistakes to Avoid When Claiming
Getting coworking deductions wrong can lead to issues with the ATO. To ensure your tax deduction coworking space claims are accepted, avoid these common errors:
- Mixing Business and Personal Use
Only claim the portion of your expenses used solely for business. Personal use must be excluded.
- Missing Documentation or No Proof of Payment
Don’t claim coworking tax write-offs without proof. The ATO can request evidence anytime, so keep receipts and clear records of business use.
- Claiming Food or Social Expenses
Meals, coffee, and after-hours events are not deductible unless part of client entertainment that qualifies under separate ATO rules.
If you're registered for GST, remember to claim the GST portion correctly. Check if your coworking provider is GST-inclusive and factor that into your deductions.
- Not Reviewing ATO Updates
Tax laws evolve. Always review the ATO’s latest rulings before claiming deductions.
By avoiding these mistakes, you ensure your coworking space tax deduction is accurate and compliant.
Understanding Industry-Related Regulations
In addition to general HMRC guidelines, individuals should also consider any specific industry-related regulations that could impact their ability to claim coworking deductions.
Certain professions or sectors may have unique rules governing expense claims or allowable deductions related to workspace costs. For instance, freelancers in creative industries might have different criteria compared to professionals in finance or legal services.
Learn more about shared workspaces from our ultimate Coworking Space Guide.
Maximise Your Workspace Tax Benefits
Coworking spaces provide more than flexibility and networking. They can also help reduce your tax liability, and can be a smart financial decision when used properly for business. By understanding what’s deductible and keeping thorough records, you can reduce your tax burden while maintaining a professional work environment.
To access tax-deductible coworking, explore Servcorp’s Coworking Office Spaces in your area and choose a plan that suits your business.
Disclaimer: The information in this article is provided for general understanding and should not be used as a sole basis for financial decisions. You are responsible for seeking independent professional advice tailored to your individual circumstances. This includes consulting financial and tax experts as needed.
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