Small Business Tips

What is Tax Deductible for Small Business?

​Saving dollars where possible is crucial to any small business. The more tax deductions you can claim, the lower your taxable income, and the better off your business will be.
 
Let’s get saving!

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​What is Tax Deductible For Small Business: The Rules  
 
First up, let’s get the rules straight on what you can and can’t claim.
 
  • The purchase must have been made during the last financial year
  • It must be work related. You cannot claim personal expenses, and be careful because the distinction is not always clear!
  • It must be an expense that you will not be reimbursed for
  • Entertainment expenses don’t count – sorry!
 
If the expense meets all these criteria, chances are you can claim it. Keep in mind that the rules for specific expenditures may vary slightly depending on the nature of your business’ income and expenses, as well as the structure of your business (Click here for more).

​What is Tax Deductible For Small Business: Expenses

Do you have these expenses? Claim them. 
 
Work-related vehicle costs
Petrol is not cheap! Be sure to claim it. Business-related vehicle costs can be claimed if they were incurred in the process of generating your income. Record your ‘business kms’ in a logbook as proof of the travel.
Travel for business
Went on a business trip? Keep an itinerary or diary of the trip as well as all your receipts. Be sure to keep all personal spending separate, as the tax office isn’t going to pay for that. (Click here for more)
 
Home office
Home office spending, an often forgotten category of expenses. This includes money spent on items for your home office or on the running of your home office space. Think lighting, heating, desk lamps, computers, desks, chairs, the cost of repairs to your office furniture and equipment…
 
Uniforms
Your job-specific clothing and uniforms are tax deductible, including the purchase, laundry and dry-cleaning costs.
 
Insurance
If you’ve spent money on insurance, claim it! Workers compensation, business-vehicle insurance, public liability, theft, and fire insurance are some examples amongst others.
 
Union or membership body fees
Nothing complicated here, if you’ve paid these fees, claim them.
 
Education
If you’ve undertaken education directly relating to your business, this will be tax deductible. So too are any journals or trade magazines you may have purchased that specifically link to your business.
 
Tax management
Getting your tax right costs money. Have you hired a bookkeeper or tax agent to prepare and lodge your tax return? Remember to add this to your list of tax deductibles.

Bad debts
A bad debt is an unpaid amount owed by a customer that you have made a substantial effort to recover, but which has been deemed uncollectable. No business likes bad debts, but there is a silver lining! You can claim these bad debts as tax deductions in the same financial year that you have written them off as uncollectable.
Interest
Any interest paid on money borrowed for your business can be added to your list of tax deductions. 

Advertising or sponsorship
You need to promote your business, and it costs money. Luckily it is also tax deductible.
 
Capital – based on depreciation 
Your large capital purchases are not immediately tax deductible, but can be claimed over time based on the amount that they depreciate. These purchases might include computers, machinery, plant and equipment, and furniture.
 
Upkeep of capital
The cost of maintaining and repairing capital items used to generate your business income can also be claimed. This might include a new paint job, repairs to a damaged fence, or service on a machine. These upkeep costs relate to fixing any defects, but be careful, this does not cover the cost of actually replacing an item.
  
The most important thing when it comes to tax deductions is to be organised. Scan all receipts and create a digital folder, so that when the end of financial year comes around they will be easy to find. If you are unsure about whether an expense is claimable, keep the receipt just in case, and check with your tax agent. Visit the ATO website before lodging your tax return to be sure you have the most up to date information.
  
Kate Hobbs

The information on this website is intended to be general in nature and is not financial product advice. The information does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice from an entity that is qualified and authorised to provide such advice, such as an accountant or financial advisor.