- 7 May 2021
- Posted by: runningthenumbers
- Categories: Accounting, Tax
Common Tax Deductions for Small Business
There are many expenses common to most small businesses, and there are other expenses that are specific to the nature of the goods or services the business provides. Are you claiming all the tax deductions that you are entitled to?
- Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
- Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
- Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
- Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
- Repairs and maintenance to assets and business premises.
Expenses must relate to the running of the business and providing the goods or services that your business offers.
Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.
There may be some expenses you want to query with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses.
What’s on the ATO Radar?
- Travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities.
- Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
- Home office expenses – this year there is a shortcut calculation for people who have temporarily had to work from home due to COVID-19. This allows for a flat rate of 80 cents per hour for work time. For people who usually work from home, check the ATO home office expenses calculator to maximise the allowable deduction.
- Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised.
- JobKeeper – if you have claimed JobKeeper for eligible business participants and/or employees, the ATO will look closely at your payroll records.
Instant Asset Write Off
This year the instant asset write-off has been renamed Temporary Full Expensing. This means eligible small businesses can immediately deduct the business portion of fixed assets up to 30 June 2022. Talk to us if you’d like advice about whether it’s a good time for your business to buy new assets and claim an immediate deduction.
Keep Your Records
Remember you need a valid tax invoice for any expenses over $82.50 (including GST) to prove the business expense.
- Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
- Keep all records relating to employees, contractors and payroll for at least seven years.
- If your business is a company, keep all records for at least seven years, including director meeting minutes.
Maximise Your Business Deductions
We can check your business’s eligibility for concessions, offsets, incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!
With so many businesses affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will get it quickly.
Let Us Help
An accountant is someone you should be able to get an appointment with without waiting for weeks, responds to your calls and emails the same day and most importantly, is someone you have a good relationship with and can trust. I guarantee that you will not be waiting months for your work to be completed and will work with you to ensure any delays are dealt with in an efficient and cost-effective manner. I also understand that you want to know how much it’s going to cost to get your work completed so will always advise you of the fee before starting any work. No surprises or fee shock!
If you would like to arrange a time to have a chat please feel free to book a time or make contact via the Contact Us page of the website. You can also send me an email to email@example.com.