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Running a business from home: What you need to know

Many New Zealand businesses operate from home. Here’s what to think about if you’re one of them.

Your home as your workplace

Where you work often comes down to your situation and budget, and many small business owners operate their business from home, especially when they’re starting out.

There are distinct advantages to having a home-based business, like being able to choose to work whenever you want and having instant access to your office.

But it can also be difficult to switch off at the end of the day, and you may find it hard to maintain focus, motivation and disciplined work routines.

Working at home can be isolating, too. It’s important to build networks within your community, both professional and personal, to keep you connected to the world outside your business.

For some people, starting a home-based business is a low-cost way to trial a business idea.

If you want to set up a home business you may want to consider talking to your local council about:

  • zoning - whether you can operate your business in your area.
  • signage rules if you’re going to be selling/providing a service from home.
  • food handling requirements (if you’re going to operate a food business.)
  • getting the appropriate license to operate.
If you use your home for business, there are expenses you can claim in your tax return.

If you use your home for business, there are expenses you can claim in your tax return.

Insurance and home-based businesses

If you run your business from home, household insurance doesn’t automatically cover your workspace or assets.

Most personal home and contents policies don’t provide cover for business use – but different insurers define “business use” differently. It’s best to chat with your provider to see what they consider business use.

Personal and business policies have different limits, different ways of settling your claim, and generally cover different types of property and events. For example, your house insurance policy may cover temporary accommodation if you can’t live in your home after an event, but it won’t provide any cover if you’re unable to continue running your business – for that you’ll need business interruption insurance.

Most home and contents policies also exclude liability cover for anything involving your business, so you’ll need to think about what cover you need for those events.

Your personal contents policy may cover some items that you use for business, but this often isn’t sufficient, so you may need a business policy to ensure your tools, equipment, and stock (if you have any) are adequately protected.

Not disclosing you’re using part of your home for business purposes, eg making your property available for short-term rental on Airbnb or Bookabach, can lead to your policy being cancelled and/or claim declined.

Guide to business insurance (external link) — Insurance Council NZ

Contact your insurer for advice on what your existing insurance covers, and what additional insurance you may need for your home-based business.

Contact your insurer for advice on what your existing insurance covers, and what additional insurance you may need for your home-based business.

Health and safety (H&S) when you work from home

If you're running a business from home, it's your responsibility to look after your own H&S. If you run a business which has staff working from home – either your home or their own - you’re responsible for talking through and developing policies with them on how they'll manage their health and safety when working at home.

A healthy and safe workplace starts with identifying and understanding what your work-related health and safety risks are, particularly those that have the potential to cause people serious injury or illness. It then involves doing what’s reasonable, what’s practical, and what you’re able to do to eliminate or minimise those risks. This is called proportionate risk management.

Just as you have to look after your own H&S, you also have to look after your workers’ H&S no matter where they work, including at home. This could range from providing safe equipment for their work, to giving them information to help set up their workstations ergonomically, to making sure the home worker keeps in touch with their boss and team members in case of emergency.

To ensure you or your staff are safe when working alone:

  • Train staff in emergency procedures including what to do in natural disasters. 
  • Make sure staff carry appropriate supplies including suitable first aid equipment.
  • Regularly contact each other to check in at specific times.

Managing work risks (external link)

accordion cakes

H&S case study

ABC home baking

Annabelle and Bernard own ABC cake business. After getting council approval to do so, Annabelle bakes the cakes at her house, and Bernard handles all the orders from an office in town. They employ Charlie to do book-keeping. They have received a lot of rush orders for Christmas parties so need to change how they work.

Who and whereMust-dos under the lawH&S steps
Annabelle always works from home. As a director, Annabelle must make sure ABC complies with its obligations.
As a worker, she’ll also have to take reasonable care for the H&S of herself and others, and follow ABC’s policies and instructions.
Annabelle has been working from home for months, so she’s aware of the risks – high-temperature equipment and sharp utensils – and makes sure she sticks to ABC’s policies about eliminating or minimising these
Bernard is working from home during the holidays – orders are coming in, but he still wants to be near his family. As a director and a worker, he’ll have the same responsibilities as Annabelle. Bernard takes regular breaks so he doesn’t get fatigued, keeps the office tidy so he doesn’t have any accidents, and keeps in touch with Annabelle and Charlie to make sure they’re doing okay.
Charlie is working a day a week while on holiday at his remote bach to make sure there are no cash flow problems. As a worker, Charlie has to take reasonable care to ensure the H&S of himself and others, and follow ABC’s policies and instructions. Charlie sets up his computer at a suitable spot in the bach. He phones Bernard at the start and end of each workday to check in. One day he notices the extension cord looks a bit worn, so buys a new one before he uses his computer again.

ACC and home-based businesses

ACC levies are based on the type of work you do and how much money you make, as opposed to where you work, so working at home will make no difference to the amount you pay in ACC levies.

If you're self-employed or a contractor and can't work because of an injury, you’re automatically covered by ACC’s CoverPlus. That means ACC pays you compensation at up to 80% of your taxable income for the most recent financial year. ACC will also contribute to the cost of your treatment and rehabilitation.

If you’re concerned that level of cover wouldn’t be enough should you be injured and unable to work, you could choose to change to CoverPlus Extra. This gives you more control over how much of your income you want ACC to cover, and means you can lower the levies you pay.

Types of cover for self-employed (external link)

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