Find Out What Business Expenses You Can Claim As A Deduction This Tax Season

By Author: Brigette Coles
Total Articles: 3
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Before June 30 comes round, you might feel inclined to arrange your financial affairs in order to keep your taxes to a minimum – this is known as tax planning and is commonly employed by large companies to ensure no nasty surprises arise at the end of financial year. If your a Perth based business owner, tax planning with a local Perth accountant in person can be an incredibly beneficial way to ensure your business is set up for a healthy & stress-free tax season.
Due to the uncertainty around tax laws, many business owners don’t fully understand their entitlements or obligations. If you don’t already have an accountant, we highly recommend that you seek counsel from a qualified Accounting Service Providers to assist you with your tax planning strategy.
A large portion of tax planning concerns understanding your eligible tax deduction claims, so you can store and sort all receipts that you’re business is able to claim for come June 30. We’ve compiled a comprehensive overview of what deductions you can claim as a business expense, and what your legal entitlements are.
What Can You Claim On Your ...
... Tax Return?
As a business, you can claim a tax deduction for a large number of expenses you incur in order to run your business. Only as long as they directly relate to how you earn assessable income. In order to claim business expenses they must fulfill the following three pieces of criteria:
1. The expense must have been incurred by your business, not for a personal purpose.
2. If the expense if a mix of both business and personal use, you are only allowed to claim for the portion directly related to your business.
3. If you haven’t got the records or receipt to prove proof of purchase or expense, you can’t claim. (Always have a system for storing and organising receipts.)
What Claims Can Be Made
There are two primary claims as a business - operating expenses & capital expenses
Operating expenses including office stationery, wages, super, recurring payments, are normally incurred when you have a legal obligation to pay for them. An invoice isn’t necessarily always required for an expense to have been incurred, but it’s important to keep some form of record for it.
For operating expenses, you generally incur the expense when you have a current legal obligation to pay for the goods or services. An invoice is not necessary for an expense to have been incurred but you do need a record of the expense.
Capital Expenses refer to a longer period expense such as a bought establishment, machinery, and equipment. Invoices and recognition of purchase are always required for these items.
Other Common Business Expenses You Can Claim
As long as you meet the ATO’s requirements to claim, the following are acceptable tax deduction expenses.
Travel Expenses
If any employees in your business travel for work, including yourself, you can claim deductions on all transport required to get them to the necessary destination, such as airfares, train, bus or taxi fares.
For overnight travel, the standard criteria for claiming expenses are as follows:
● Keep written evidence of all expenses incurred for one night or more.
● Keep an expenses diary recording all the particulars of the business activities you undertake for a travel period of 6 consecutive nights or more.
Motor Vehicle Expenses
If you have a car you use for business, you are eligible to claim a deduction on that expense. However, how you claim your expenses is dependant on a number of things:
● Business Structure
● Vehicle Type
● How the Vehicle is Used
If the vehicle is used for business and personal, you will need to keep a details log of your business use kilometers and expenses accrued.
Business Repairs and Maintenance Expenses
If your business requires any repairs or general maintenance, you can claim a deduction for some of those expenses including the following:
● Repairing and conditioning gutters
● Plumbing repairs and maintenance
● Electrical repairs and services
● Machinery repairs and services
Running your business from home
If your business is home-based, or you have a home office that you regularly work from, then you may be eligible to claim for some of your business expenses incurred including:
● Occupancy expenses - mortgage interest or rent, council rates, land taxes and house insurance premiums.
● Operating expenses - gas and electricity, phone, declines in value of plant and equipment, declines in value and cost of repairs to furniture and furnishings, cleaning.
General Operating Expenses
Operating expenses refer to the expenses incurred from the everyday operations of your business. Some of these expenses include:
● stationery
● salaries
● internet
● insurance
What You Can’t Claim As A Business Expense: Although the ATO is quite liberal with the number of things you can claim as a deduction, there are certain non-negotiables that all businesses are not allowed to claim. These include:
● Any entertainment expenses
● Traffic fines in a business vehicle
● Private or domestic expenses including childcare fees or clothing for your family
● Expenses relating to earning income that is not assessable, hobby earned money.
● Any GST component of a purchase if already claimed as a GST credit on your business activity statement.
When it comes to business tax deductions, your eligibility varies substantially depending on size, structure, industry & revenue. There are extensive lists of expenses & you can generally claim as a business available online, however, we advise you invest in an accounting services before the end of financial year roles around to assist you.