10 Small Business Tax Deductions You Should Know in 2022

Friday, 17 Jun 2022

Business taxes are a considerable obligation that cannot be ignored. Preparing for the tax season in advance is essential to ensure that you are ready with the submissions and reports.

Entrepreneurs rely on professional bookkeeper Melbourne to pay their taxes on time and calculate them correctly. Errors in tax calculations or missing out on claiming deductions can lead to losses for the business. Deductions are a significant part of tax calculations because they help lower the amount.

A business owner can claim deductions on various expenses that help earn measurable income. However, they must have the records for these transactions to claim them. So, here is a list of ten small business tax deductions entrepreneurs in Melbourne should know for the year 2022.

1. Business Travel Expenses

If the business owner or the team members must travel to another city or within the city for work or meeting a client, they can claim the deduction. The trip could be as short as a few hours or as long as a week. They could claim the travelling expense deduction if they took a flight, train, bus, taxi, or tram to reach their destination and return to Melbourne.

Employees who want to claim overnight travel expenses must have a permanent address in another place, and the purpose of staying back for the night should be related to work. The employee cannot claim visa and travel insurance costs or any other personal expense during the visit, such as shopping, sightseeing, holidaying, etc.    

2. Home-Based Business Expenditures

Several home-based businesses in Melbourne can also claim tax deductions for expenses related to the occupancy, such as rent, mortgage, land tax, property insurance, etc. Besides these, they can also claim expenses related to utilities used for business purposes, plant and equipment depreciation and repair or cleaning of the furniture. In addition, if they travel for work, they can claim the cost of the trip.

3. Motor Vehicle Charges

Some businesses use vehicles for work, such as cars or minivans. These can be used to transport goods and services or move workers from the Melbourne office to the client site. Thus, the business owner can claim business motor vehicle expenses, including fuel and oil charges, registration, insurance, depreciation, interest on a vehicle loan, repair and maintenance. If the vehicle is used for personal and business work, the bookkeeper will help you calculate the business use expenses only.

4. Digital Product Expenses

The bookkeeping company hired by the business can help in understanding this deduction as it can be claimed for two types of expenses, including operating and capital expenses. The Government recently announced the Small Business Technology Investment Boost and Small Business Skills and Training Boost.

However, these initiatives have not become laws until now and businesses need to follow the existing regulations to pay taxes and claim deductions. The operating costs that can be claimed include internet service provider fees, cloud storage, lease, etc. The capital expenditures include the cost of computers, cameras, mobile phones, etc.

5. Salaries, Wages and Super Contributions

Usually, the bookkeepers are responsible for payroll management. So, they are equipped to calculate the tax deduction for payment of salaries, wages and the super contributions that are made to the super fund or retirement savings account. The deduction rules are a bit different for sole traders and partnerships in Melbourne. Thus, they must ask their bookkeeper to guide them through the process.

6. Other Operating Costs

These are expenses that are borne by the business in Melbourne while running the everyday operations. These include supplies, stationery, advertising, bank fees, lease, etc.

They can be claimed in the financial year when they were incurred by the business, but they must have accurate records of the transactions. A plethora of expenditures can be claimed as operating cost deductions. Your bookkeeping company can help in collating the data and the records for tax submissions.

7. Repair and Maintenance Charges

Every business incurs costs related to the repair and restoration of the equipment, fixtures, and machines. Sometimes, they may have to be replaced if they are not working or are beyond repair.

The bookkeeper can claim these if they are utilised to generate business income. Capital expenditures, such as purchasing new equipment for the business, cannot be claimed by the business owner.

8. Depreciating Assets and Capital Expenses

The capital expenses that can be claimed by the Melbourne-based business include depreciating assets and the establishment or enhancement of the business structure. Your bookkeeper can help you identify the depreciating asset expenses that are business assets that have a limited life expectancy and their value declines over the years, such as machines, vehicles, mobile phones, furniture, computers, etc.

The other capital expenses include the costs incurred by a start-up or the expense of establishing a business. The entrepreneur can also claim a deduction for structural improvements made to the property to increase profits.

9. Bad Debts

The business owner in Melbourne can claim a deduction for income that cannot be retrieved from a buyer or a borrower, called bad debt by bookkeepers.

10. Carbon Sink Forest Expenses        

If the business has been involved in planting trees in a carbon sink forest, it can claim a deduction for the cost involved in completing the task. The deduction has been put in place to improve carbon sequestration that helps in absorbing carbon dioxide from the atmosphere.  

Conclusion

Hiring bookkeepers in Melbourne allow business owners to identify the business expenses that are deductible and can reduce the tax burden. They help maintain the records required to claim these deductions without disputes.   

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