A great way to minimise your tax bill is to utilise all small business tax deductions you can claim. Business owners often overlook many of the small business tax deductions they may be eligible for. Knowing what these deductions are can help you save your hard-earned cash when the end of the financial year comes around.
To make sure you’re maximising your tax savings, here’s a list of possible deductions for eligible small businesses.
Possible Small Business Tax Deductions
It’s good practice to review your accounts receivable ledger prior to 30 June 2022. If you have any bad or unpaid debts or a balance that is deemed uncollectible, you can write them off and claim them as deductions. Just ensure that they are written off before the yearend.
Advertising and sponsorship
If you incurred expenses to promote your business, you can claim deductions from those expenses. But, you need to ensure that the expenses are not considered “entertainment”, otherwise, you cannot claim these as tax deductions.
Travel expenses, such as airline tickets and car expenses, incurred for business purposes can usually be claimed. To be eligible for deductions, you need proof that the expenses were actually incurred for business use, including receipts, itinerary, etc.
There are 2 methods for calculating your motor vehicle deductions:
- Cents per kilometre – This method allows you to claim a maximum of 5,000 business kilometres per car, per year. This doesn’t require written evidence to show exactly how many kilometres you travelled. However, the ATO may ask you to show how you worked out your business kilometres. The rate used for the 2022 financial year is $0.72 cents.
- Logbook – Where you travel more than 5,000km for work purposes during the financial year, a logbook is advised to substantiate your vehicle deductions. A logbook must be kept for a period of 12 continuous weeks and record all work-related use of the motor vehicle during this time. When completed, the logbook will be valid for up to 5 years or when the business use of the motor vehicle changes significantly. Logbooks can either be a hard copy (available from Officeworks or AusPost) or digital via mobile apps.
Do you provide your employees with other benefits aside from their salary and wages? You may also be eligible to claim deductions from the cost of these fringe benefits.
To claim a deduction for superannuation payments, you must ensure that the payments are received by the super fund or the Small Business Superannuation Clearing House by 30 June.
Salaries and wages
You may also claim deductions when you pay salaries and wages, depending on your structure. If you are operating as a trust or a company, you can claim a deduction for salaries paid to your employees or yourself. For partnerships, you can only claim deductions for salaries paid to employees.
Work from home expenses
If you’re working from home, you can claim deductions from the business portion of your expenses. This includes costs incurred for lighting and heating, internet and phone, home office equipment, etc. You need documentation to support your claims so it’s best to keep timesheets and other records to prove that these expenses are actually incurred for business purposes.
If you are taking courses related to your role in your business, you are entitled to claim tax deductions for self-education expenses including textbooks and journals, computer expenses, student union fees, accommodation and meals, and other expenses.
Insurance costs for fire, business-use vehicles, theft, loss of profits, and workers’ compensation are also deductible. Note that this does not include life insurance or critical-care insurance.
Technology Costs and Digital Adoption
You may be entitled to claim an income tax deduction of 120% for the cost of expenses and depreciating assets that support digital uptake. This includes portable payment devices, cyber security systems or subscriptions to cloud-based services. If you avail of these assets and services from 29 March 2022 to 30 June 2023, you are qualified to claim the expenditure in your 2023 income tax return.
Training and Professional Development
A 120% tax deduction can be claimed by eligible businesses for expenses incurred for external training courses. These courses must be delivered to employees by education providers registered in Australia. If you provide training and professional development sessions to your employees from 29 March 2022 to 30 June 2023, you may claim it in your 2023 income tax return.
Tax management expenses
If you use a tax agent to prepare and lodge your tax returns and business activity statements, you can claim the amount of the fees your pay your tax agent.
These are just 12 of the small business tax deductions you may be able to claim. There are a lot more options you can look into to reduce your tax liabilities. You must also bear in mind that some options may not be applicable to certain circumstances. To ensure you’re not applying for deductions more than you can claim, it’s best to talk to a tax specialist.
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