Everything You Need To Know: Running A Business From Home (2025 Updated)

Whether you’re thinking about opening your own business or want to turn a hobby into a full‐time gig, running a home business can give you more freedom and flexibility to do what you love while reducing the costs involved in renting commercial premises. In today’s digital and dynamic landscape of 2025, many entrepreneurs are realising that a home business can also be the launchpad for innovative online and hybrid business models – check out our guide to moving your business online legally for some useful tips.

This handy guide will take you through the key elements and answer a range of questions to set you up with everything you need to know when starting a home business.

What Is A Home Business?

If you run a business at or from your home, then you’re operating a home business. It’s common for many small businesses – such as independent contractors, sole traders, and start-ups – to operate from home. In essence, running your business from home means that your primary place of work is within your residential premises, although you might also incorporate external workspaces when necessary.

What’s the difference between running a business “at” home versus “from” home? Typically, a business is said to be run at home when most of the work occurs on the residential premises – the home is the central hub. Conversely, when a home serves primarily as a base while day-to-day operations also extend beyond for deliveries or meetings, you’re running a business from your home.

Choosing Your Business Structure

The business structure you choose will impact everything from liability and tax obligations to hiring employees and scaling your operations. Think of your business structure as the foundational frame of the house; once the structure is built, it can be challenging to make changes. It’s important to take time to choose the best structure for your unique circumstances. For further insight, our article on Sole Trader vs Company provides a detailed comparison of these common structures.

There are three main business structures to consider when deciding what’s best for your business:

• Sole trader
• Partnership
• Company

Operating as a sole trader is generally the cheapest and simplest structure to establish. Under this model, you run the business under your own name and Australian Business Number (ABN) – however, note that you’re also personally liable for any debts or losses incurred.

A partnership involves two or more people (or entities) running the business together. Although partnerships are relatively straightforward to set up, each partner can be held personally liable for the business’s debts and for the actions of other partners. This is an important consideration if you’re planning to share control and strategic decisions.

In contrast, establishing a company means forming a separate legal entity with its own rights and obligations. This structure requires registering the company with ASIC, which may be more complex and costly compared to other structures. However, a company offers the advantage of limited liability – meaning your personal assets are generally protected if the business incurs debt. Additionally, with a company, profits are taxed at the corporate rate, which can be favourable compared to personal income tax. For guidance, you can refer to our detailed company registration information.

Deciding which structure is right for you will depend on your personal and business circumstances. It’s not uncommon for business owners to start as a sole trader and later transition to a company as the business grows. Given the complexities involved, it’s always a good idea to speak to a lawyer to understand the pros and cons of each option.

Do You Need Council Approval?

In NSW and many other regions, most home businesses can operate without needing local council approval provided they meet certain criteria. Generally, your home business won’t require council approval if:

• It doesn’t negatively impact the amenity of neighbours or create more disruption than what is typically expected from a residential premises – this includes aspects like noise, smells, fumes, traffic, parking, signage, and waste.
• You display no more than one sign identifying your business.
• Any goods sold are produced in your home business, with an exception made for online retail sales.
• The business does not involve activities such as:
  • Home-based child care (such as family day care)
  • Skin penetration procedures
  • Food manufacturing
  • Bed and breakfast accommodation
  • Sex services

Councils set their own approval requirements and policies for these types of businesses, so it’s recommended to contact your local council or review their Local Environmental Plan for guidance. While pandemic-related restrictions that once limited the number of non-resident employees have largely been lifted as of 2025, some councils may still impose specific guidelines. For further clarity on local planning regulations, feel free to visit our Regulatory Compliance section.

Licences And Registration

When setting up and running a home business, you may need to comply with specific registration and licensing requirements, depending on the nature and location of your operations.

Register For An ABN

Based on the business structure you choose, you’ll likely need to apply for an Australian Business Number (ABN). This unique 11-digit number identifies your business for taxation and other governmental purposes. An ABN is also essential for registering an Australian domain name and accessing various business credits and grants.

Register Your Business Name

If you plan to trade under a name that differs from your own, you must register your business name with the Business Registration Service. Remember that you’ll need an ABN (or an ABN application number) before you can register a business name. Sole traders and partnerships may opt to trade under their personal names, but companies are required to register a business name. It’s wise to search the ASIC business name register and IP Australia to verify that your chosen name isn’t already in use.

You can read more about how to register your business name here.

Licenses

Depending on the type of business you’re running, you might also need to obtain specific licences. Check the Australian Business Licence and Information Service (ABLIS) to find out which licences or permits are necessary for your particular operation. This tool is regularly updated to reflect any changes in legislation up to 2025.

What Are Your Tax Obligations?

Sorting out your tax obligations can be a complex task, particularly when operating a business from home. It’s a good idea to speak to an accountant or a tax lawyer who can provide advice tailored to your circumstances. For the most current tax information in 2025, you should also check the latest updates via the ATO website.

No matter whether you’re set up as a sole trader, partnership or company, you must obtain a tax file number (TFN) to ensure you are taxed correctly and avoid any penalties. In addition to that, there are several taxes you may need to be aware of, including:

Goods and Services Tax (GST)	GST is a broad‐based tax of 10% that applies to most goods and services sold and consumed in Australia. Registration for GST is compulsory if your business has an annual turnover of $75,000 or more.
Pay As You Go (PAYG) Withholding	If you employ staff, you are required to withhold a portion of their payments to cover their tax liabilities. This system is designed to help employees pay their tax obligations gradually throughout the year.
Fringe Benefits Tax (FBT)	If you provide non-cash benefits to employees, such as company cars, discounted loans, or subsidised gym memberships, you might need to pay FBT on these benefits.

Additionally, as a home business owner, you may have specific tax liabilities and be eligible for various deductions. Our article on legal requirements for starting a business provides further details and insights.

Liabilities

If you operate your home business from property you own, you might face certain liabilities such as:

• Land tax
• Capital gains tax, should you sell the property from which your business operates

Deductions

You might be able to claim deductions for a range of business expenses, including:

Running Expenses	Costs directly related to operating your business, such as electricity, phone bills, cleaning, printer consumables (e.g. ink and toner), and depreciation of equipment and furniture.
Occupancy Expenses	Expenses associated with the property you use for the business. You might be able to claim a portion of rent, mortgage interest, insurance premiums, and council rates.

For more specific details on what you may claim, visit the ATO’s deductions page.

Can You Put Up A Sign To Advertise Your Business?

Putting up a sign for your home business can be a great way to attract new customers and clients. Your sign should display your business details clearly without including advertising for goods or services beyond basic information. Importantly, you are generally permitted only one sign.

Your sign may include details such as your name or business name, the type of business, your phone number and address, hours of operation, and your logo. In residential zones, any sign must not be illuminated; however, in business or industrial zones, illuminated signs are allowed between 7am and 10pm as long as they are not animated or flashing.

There are three common types of business signs:

1. Building signs
2. Wall signs
3. Window signs

Type of Sign	General Requirements
Building Signs	Must not exceed 2.5m2 in area, must be mounted flush against an exterior wall or parapet without protruding more than 30cm, and must not extend higher than the building’s parapet or 15m above ground level (whichever is lower).
Wall Signs	In residential zones they should not exceed 1m2 in area, must be fixed flat on an exterior wall, fence, or similar structure, and must not be more than 2.5m above ground level or extend beyond the building’s parapet or eaves.
Window Signs	The sign’s area is limited to the smaller of 20% of the window’s surface or 6m2, must be displayed within the window, and should not be illuminated.

Can You Run Your Business From A Rental Home?

If you’re renting and considering a home business, always review your residential tenancy agreement (lease) first, as it may restrict the use of the property to residential purposes only. You might also need to obtain permission from your landlord for any business activities or signage.

Additional factors to consider when running a home business from a rental property include understanding your rights under the Residential Tenancies Act 2010 (NSW) or the applicable state legislation, and being aware that any damage caused by business activities could jeopardise your bond refund.

Do I Need Insurance?

Having the right insurance is crucial for reducing uncertainty and protecting your business, customers, and personal livelihood from unforeseen circumstances. As a home business owner, it’s important to review your home and contents insurance policy since many policies cover only residential use. Consider speaking with an insurance specialist – for instance, our friends at BizCover can help you tailor a cover that suits your needs.

Furthermore, some types of insurance are compulsory in Australia depending on your business type and size, including:

• Workers’ compensation insurance if you have employees
• Public liability insurance for certain high-risk businesses
• Compulsory third party insurance if you own a vehicle

Note: Each State and Territory administers its own schemes and requirements, so always check the relevant guidelines for your area.

What Do I Do If I Want To Close Or Sell My Business?

There are a range of reasons why you might decide to close or sell your business – whether it’s due to personal circumstances, market changes, or the desire to retire. This decision can be complex, so it’s wise to seek legal advice to explore your options.

Your options might include:

• Securing financial support or additional funding to continue operations
• Temporarily pausing your business
• Adapting your business model
• Implementing a succession plan to pass the business on to a new owner

Selling Your Business

If you decide selling is the right move, you may want to speak with a business valuation specialist to determine your company’s market value. Additionally, consider whether you plan to sell your business assets – such as equipment, stock, or licenses – and whether this sale will incur GST or capital gains tax. For guidance on sales and transfers, our resource on Business Sale Agreements might be useful.

Closing Your Business

Closing your business involves several steps to ensure you meet all legal and contractual obligations. You’ll need to cancel your business name, deregister your company with ASIC (if applicable), and continue to meet certain legal requirements until deregistration is complete.

Business Registrations

Remember to officially cancel your business name and deregister from ASIC. Even if you cease trading, legal obligations often persist until registration is formally cancelled.

Tax Obligations

Consult with a tax professional regarding your final activity statement, GST adjustments, lodgement of your final tax return, and Single Touch Payroll (STP) requirements. Notify the ATO once you’ve closed your business, keeping in mind key deadlines such as cancelling your GST registration within 21 days and your ABN within 28 days of your final trading day.

Taking Care Of Your Employees

If you have employees, ensure you communicate your intention to close the business and prepare their final pay, which covers outstanding wages, leave entitlements, and any redundancy or notice payments.

Additional considerations may include notifying your local council (if required), cancelling insurance policies, licences, permits, and informing suppliers and customers about your business closure.

Where To Now?

Opening and running a home business is a significant endeavour – one that requires careful planning and ongoing management. As technology and market trends evolve in 2025, many home business owners are embracing digital innovations and flexible work environments to stay competitive. Whether you decide to expand your online presence or streamline your operations, staying informed about the latest legal and business trends is essential. For further insights on adapting your business model for the modern age, explore our Business Set-Up Ideas and Plans guide.

Remember, if you need support or have questions along the way, our team of friendly lawyers is here to help you navigate every step of your business journey.

Give us a call on 1800 730 617 or shoot us an email at team@sprintlaw.com.au for a free, no-obligations chat.

---