The Big List of Small Business Tax Deductions (and How to Claim Them)

Wednesday, 2 Oct 2019

Small business owners are always on the run and have to juggle multiple tasks without fail. From client meetings and business associations to supplier negotiations and team management, they have a lot on their to-do list. Another significant aspect of running a small business is filing taxes accurately and claiming tax deductions to avoid losses.

This is the reason why most of them rely on bookkeepers in Sydney, who are proficient in managing the books, preparing financial reports and claiming tax deductions. Amidst all these bookkeeping activities, claiming tax deductions takes the top spot as it lowers the tax liability of the business by reducing its taxable income.

That is why you must be aware of the small business tax deductions in Sydney to make sure you get an affordable tax bill. Businesses can claim tax deductions for a variety of expenses incurred by the enterprise.

However, the business owner must ensure that they are not including any personal costs in the claims and have enough proof (documents) to support their assertion. The costs must be directly associated with the earning of an assessable income and not with any private expense.

Whether you are located in Chatswood, Randwick or Parramatta, you can check the Australian Taxation Office (ATO) website for details on all the tax deductions. Let us help you in understanding them comprehensively right here. The key is to claim legitimate tax deductions as indicated by your bookkeeper, which include the following.

The Big List of Small Business Tax Deductions

Before we go on listing the items, you should be clear about the fact that if the expense is a combination of personal and business use, then you can claim only the part which was used for business. Also, you must have the financial records prepared by your bookkeeper to back your claim.

1. Deduction For Staff Salaries, Wages and Super Contributions

The owner of the business can claim a tax deduction for the payments made to employees in the form of salaries and wages as well as super contributions. This deduction is dependent on the type of organisation. For instance, a sole trader or a partner cannot pay salary to himself as they are not the employees of the entity.

A company or a trust can claim deductions for salaries and wages paid to the owner and employees. You can also claim the payments made to contract labour. Besides, you can claim a deduction for your super contribution when you file your personal tax return.

2. Deductions For General Operating Costs

There are myriad expenses incurred by a business during its day-to-day operations, and these can be claimed for tax deductions in the same income year when they were sustained. Your bookkeeper must keep all the records of these transactions updated whether you are positioned in Chatswood, Randwick, Parramatta or anywhere else in Sydney.

The general operating expenses include advertising, public relations, bad debts, bank fees, legal costs, insurance premiums, loan interest, luxury car lease, stationery, trading stock, tender charges, transport, website maintenance charges, parking, waste removal, etc.

3. Deduction For Work-Related Travel

The business travel expenses that are tax-deductible include costs incurred while travelling for business meetings. The tours can range from day-long travels to overnight or several days of travel. You can claim expenses like airfare, train, taxi and bus fares, car hire fares, accommodation costs, and food if you are staying away from home for the night.

4. Deduction For Motor Vehicle Expenditure

You can claim deductions on vehicles used for business purposes, such as cars, motorcycles, utility truck, minivans etc. You can claim expenses like fuel, servicing and repair, vehicle loan, lease reimbursement, insurance premiums, depreciation and registration.

However, make sure to separate the private use of the vehicle and maintain a logbook for proof with the help of your bookkeeper.

5. Deduction For Maintenance and Replacement Costs

The business owner can claim deductions for the cost of maintenance, repair and replacement of tools, equipment and the premises in Sydney, which is being utilised for operations. However, this expenditure should not include capital expenses which involve money spent on buying business assets.

6. Deduction For Home-Based Business Expenditure

If you are running a part of your business from home or have a home-based business, then you can claim deductions on location expenses like rent, mortgage interest, land taxes, home insurance premiums, etc.

You can also claim necessary expenses such as electricity, internet, phone, etc. Motor vehicle expenses for travelling due to work are also tax-deductible. So if your office is in Chatswood, Randwick, Parramatta or any other part of the city, you must be aware of these deductions.

7. Deduction For Depreciating Assets

The capital expenses can also be claimed by a business for deduction over some time. Organisations with turnover ranging between $10 million to $50 million are entitled to the instant asset write-off that allows a deduction for the entire cost of the asset, under the appropriate threshold, in the year of purchase or installation.

Your bookkeeper must keep track of the capital expenses which include the cost of depreciating assets and expenditure on their establishment, improvement or replacement. Depreciating assets are those possessions whose value is reduced with time such as computers, furniture, vehicles and equipment.

Expenses Which Are Not Deductible

If you are under the impression that all the business costs are tax-deductible, then you are mistaken. There are few items that do make it to the list, such as traffic fines, GST constituent of a purchase if you can claim it as a GST credit on your BAS, household or family expenses, entertainment costs and expenditure associated with non-assessable income. Your bookkeeping company in Sydney can keep you updated with all these details.

How To Claim Tax Deductions?

The process of claiming tax deductions is based on the type of organisation you own in Sydney. If you are a sole trader, you can claim the deductions in your individual tax return under the ‘business and professional items’ schedule with the help of myTax or a registered tax agent.

If you own a partnership, then you will be able to claim deductions in your partnership tax return. Similarly, trusts can do so in their trust tax return and companies can take advantage of the company tax return.

Conclusion

With such a long list of deductions offered by the ATO, it can become complicated to keep track of the items during tax time. So take help from your bookkeeper and enjoy a hassle-free tax season.

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