People put a lot of their hard earned cash back into their business to make it grow and tax time often becomes a huge time burden.
Sometimes, it can seem like a never-ending struggle and each time you manage to set something aside, the business demands that you put something back in. This could relate to anything from servicing of equipment, new equipment, new software, training and development and more.
The Australian tax system allows business owners to claim back on investments and purchases that are directly related to their business. Generally, you can claim operating expenses such as office stationery and wages (in the year you incur them and capital expenses such as machinery and equipment) over a longer period of time.
For operating expenses, you generally incur the expense when you have a current legal obligation to pay for the goods or services. The definition is quite broad, and it can sometimes be difficult to work out exactly what you can claim back? Read on to find out what you can claim back come tax time and how to go about doing it.
1 – Purchase a $20,000 business asset before tax time
In the last Budget, the government extended the $20,000 write off scheme to 30 June 2019. Under this piece of legislation, if you purchase a vehicle, machine or something of the sort which is used directly and exclusively by the business, you could qualify for an instant deduction. The rules are quite strict and our team of experts can help you work out what you can and cannot claim back.
The scheme covers asset purchases of up to $20,000 for companies with a turnover of less than $10 million.
2 – Upfront expenses
This one is often overlooked at tax time. Small businesses could be eligible for a tax deduction for upfront expenses that roll on for up to 12 months. How does it work? If you own a business, you will have to pay an insurance policy, utility connection fees, and other subscriptions that are related to what you do.
You can claim back on these, but not everything counts. To get a proper idea of what you can and cannot claim, it is best to speak to a tax expert.
3 – Stay smart
Education and training are tax-deductible, even if they are not within the direct remit of business. If you own a smash repair shop, you are entitled to claim back on digital marketing classes. If you produce linen ware and want to take a TAFE class about expanding your business, you can also claim on that. This also holds true if you pay for any training for your employees. If it will help the business run better, you can probably claim it at tax time. Speak to a tax expert to get proper guidance.
4 – Getting around
Most business owners know that they can claim on petrol. But did you know that you can also claim highway tolls? Yep, that’s right. If you are on the road to visit a business site or a client, you can claim it. Don’t forget to claim on maintenance either. You can also claim back on public transport, provided that it is related to your business. You can claim on trains, ferries, airfares, business lounges, taxis and Ubers. The best way to keep all of this in order is to get a business credit card and use it exclusively for travel purchases to avoid confusion at tax time.
5- Business accommodation
This one is an extension of the previous point. If you are travelling on business, then you are perfectly entitled to claim back on accommodation costs. The other side to this is that if you are a tradie, and prefer to live out of a camper van while away at some remote building site, you can claim it. Spending money on campervan accommodation is exactly the same as spending money on a hotel room in the eyes of the ATO at tax time.
6 – Startups
A new incentive in the last budget was to allow startups to claim back on any advice they have paid for to get a business up and running. Have you paid a social media consultant or a digital marketing consultant? They are perfectly legitimate claims to make.
7 – Communication
If you own a business, you are most likely going to need mobile phone subscriptions, internet, mail servers, online shopping fees, website fees and heaps of other little expenses that mount up. You are perfectly within your rights to claim back on all of these. Communication is essential for businesses and is an integral part of operations.
8 – Work from home
This one gets a bit tricky and home workers often get audited because some people have abused the system. If you genuinely work from a home office, you can claim back on portions of everything from your mortgage or loan to water and electricity or a picture frame in the waiting room. Because it is a touchy area with the ATO, the best advice we can give is to seek advice from a professional accountant.
9 – Supplies
This applies to both home offices and brick and mortar businesses. If you need to pay for supplies such as pens, papers, or ingredients, for example, you are entitled to claim this back on tax.
10 – Last but not least
Here’s a great reason to get the advice of an accountant on these matters… you can claim back your expenses! If your accountant charges you for a phone conversation (we don’t, we like to talk to our clients) you can claim it back. If you book an appointment to find out more about what you can claim, that is tax deductible. Win-win scenario! If you don’t have an accountant but use accounting software, you can claim back on it.