Common Tax Deductions For Small Businesses

Monday, 23 Oct 2023

Business taxes are contributions made by entities to develop public services in their states. The Australian Taxation Office collects it and helps companies enjoy benefits like connectivity through roads, public transportation and well-maintained public areas.

While many business owners consider paying taxes a liability, they help enhance infrastructure and economy in the region, ultimately benefiting the business. Also, small businesses can claim tax deductions, which reduce their financial burden.

If they pay the correct amount on time with the help of their bookkeepers in Melbourne, they can avoid penalties and boost their credit scores. They can claim various deductions to cut down this cost significantly. 

Here are the common tax deductions for small businesses that entrepreneurs should not ignore. Also, effective bookkeeping can help in tax planning and filing timely returns.    

Common Tax Deductions for Small Businesses

Some common business taxes paid by entrepreneurs in Melbourne include CGT, GST, payroll tax, company tax and other business taxes. The total cost can be high unless entrepreneurs opt for deductions related to daily operating expenses, business purchases and the cost of depreciating assets. Here are the deductions that small businesses must claim.

1. Deduction For Motor Vehicle Expenses

Businesses that use vehicles for work can claim concessions for fuel, repairs and servicing, insurance, depreciation, interest on vehicle loans, lease payments and registration. The types of motor vehicles that fall under this deduction are cars, motorcycles, minivans, utility trucks and panel vans.

They should be owned by the business or leased or obtained through a hire-purchase agreement. Calculating the motor vehicle expense can be tricky if the same vehicle is used for personal use by the entrepreneur.

Professional bookkeepers can help in this regard by keeping track of business use to calculate the correct expense and claim deductions.

2. Home-Based Business Expense Deductions

Entrepreneurs who run their businesses exclusively from home or some part of the operations from their residences can claim tax deductions. These include council rates, land tax, utility bills, furniture repair, house insurance and use of motor vehicles for business travel.

Home-based businesses must hire expert bookkeepers Melbourne to identify the expenses that can be claimed. They can also claim deductions for the reduction in value of depreciating assets.  

3. Business Travel Expense Deductions

Entrepreneurs and their employees who must travel for work can claim tax deductions for this expense. They can claim for expenses, such as airfare, bus tickets, train fare, cost of hiring cars or taxis, etc.

They can also claim the costs incurred through accommodation and meals during the business trip. They should not include any personal expenses incurred during the trip into business costs.     

4. Deductions for Salaries, Wages and Super

Small businesses with employees have to comply with the PAYG withholding and reporting obligations for the payments made to the workers. They can claim deductions for the salaries, wages and super paid to the employees. The bookkeeping professionals in your organisation can help ascertain the payroll tax to know the correct amount.   

5. Deductions for Depreciating Assets

Small businesses with turnover lower than $10 million after July 2016 or below $2 million in the past financial years use the simplified depreciation rules for this deduction. It helps them get an instant write-off for assets bought for a price lower than the relevant threshold.

Entrepreneurs can claim tax deduction for the business cost incurred in the year when the asset was used or installed for the first time. Your bookkeeper in Melbourne can help you identify the decline in the value of assets and other capital expenses that can be claimed.

6. Operating Expenses Tax Deductions

Melbourne bookkeepers stay on top of business expenses and identify the costs that can help to slash the tax bill. They keep track of operating expenses that can be claimed for deductions.

These include advertising, bad business debts, interest on loans, insurance premiums, legal fees, buying trading stock, stationery, commercial leases, waste removal, parking, etc. Several other operating expenses can be claimed with the help of bookkeepers.

7. Tax Deduction for Maintenance and Repairs

Business owners can claim tax deductions for the costs incurred due to repair, replacement and maintenance of the property where they operate or the tools they use.

However, they cannot claim deductions for buying plant and equipment, which is considered a capital expense. The costs that can be included in the claim are plumbing, painting, appliance maintenance, repairing machines, etc.

8. Deduction for Cost of Digital Products

Every small business owns digital products such as computers, laptops, mobile phones, internet services, software subscriptions, cloud storage, etc. They can claim deductions for the expenses related to these products. They can be divided into operating and capital expenses to calculate the appropriate tax amount through effective tax planning.

Wrapping Up

Running a business involves making many bill payments, and taxes are the most significant among them. It is essential to plan for the tax season in advance with the help of efficient bookkeeping in Melbourne to claim the relevant and applicable deductions.     

Let‘s Connect


Get In Touch