Eligible Deductions for Small Businesses by the ATO That You Should Know
Besides managing your small business operations, you do have to meet its tax obligations. You have to pay taxes on time as per ATO regulations to meet compliance. But it doesn’t mean to overpay your tax liability or claim deductions excessively. That’s where you need to know about eligible Small Business Tax Deductions before claiming them. Paying tax is your responsibility, but the rule is simple: it applies to your profits, not to sales. Likewise, the expenses you made for business are claimable as per ATO guidelines. So, let’s have a look at common deductions you can claim in your business tax return.
- Traveling & Vehicle Expenses
Using a personal van, car, or truck for business is allowable, and the costs associated are claimable. So, you can claim expenses such as fuel, insurance, servicing, rego, depreciation, etc. You can keep a record of travel expenses using logbook methods of 12 weeks or cents per km. However, trips from home to work and back are considered private and not claimable. But trips between job sites are eligible for deductions. If it seems confusing, consult a Business Tax Accountant without any delay.
- Business Operating Costs
Every business incurs day-to-day costs for the smooth running of operations. This includes expenses like rent for premises, utility bills, internet, bank charges, fee of an Accountant for Small Business. If you incur these expenses directly for the operation of your business, you can claim them. Well, you have to keep proper records for each of the expense you have incurred. Hence, it is necessary to ensure that you have invoices, bills, and receipts of charges paid. ATO may want to inquire if you have maintained all records properly.
- Tools and Equipment Costs
If you are a retailer or tradie working, you can claim expenses made for tools and equipment. If your turnover is under 10 million dollars, you can instantly write off assts lesser than 20000 AUD each. For example, you can claim expenses for an office laptop, printer, hand tools, fridge for the office, etc. However, the eligible amount of claim is necessary to consider while preparing Tax Return Business. Also, assets to write off instantly must be installed and ready to use by your business before EOFY.
- Education & Training Expenses
Upgrading your skills for the existing business sometimes requires additional training. Therefore, the costs you incur for attending seminars, courses, and workshops are claimable as per ATO regulations. But remember that you can’t claim deductions for expenses which are not directly related to your business. For example, if you own a café and opt for a barista course, it is deductible. But doing MBA for switching to new career is not a claimable expense as per the ATO.
Maximize your Business Deductions Legally
For maximizing deductions, proper Tax Planning Australia is required; that’s where Kirpa Tax can help. Experts can maintain accurate records of your business expenses and keep you informed about ATO regulations. Thus, you can claim expenses legally and stay compliant with ATO guidelines.
FAQ’s
What makes a business expense deductible as per ATO?
An expense is deductible if it is made for earning profit or revenue. Refer to Small Business Tax Deductions above, which are claimable legally.
Is claiming home work expenses eligible for businesses?
Yes, operating your business from home is eligible legally, subject to rules of ATO. You should consult a Business Tax Accountant and get relevant information.
Is expense related to business vehicle usage deductible?
Expenses such as fuel, insurance, registration, and depreciation are claimable. But you are not permissible to claim costs of personal trips made from home to work.
What is the threshold for small businesses to claim deductions?
For most deductions, your business must have an aggregated turnover of less than $10 million. Check the rules of the current year with your Accountant for Small Business to clarify.
Can I claim GST and expenses incurred for my business?
If your business is GST registered, you can only claim expenses without GST. But if not, you can claim the full amount of expenses, including your GST.
Do I need to keep all records for expenses made?
ATO wants to see records, and only your bank statement is not enough to justify. Keep all receipts or store them digitally to show proof of expenses.
Should I seek the help of an accountant for business deductions?
Kirpa Tax helps you identify eligible deductions and do Tax Planning Australia. We navigate and confirm the deductions you have requested are legal.