When running a business, most expenses you incur in running your business can be claimed as deductions to reduce your assessable income. The rules however tend to vary depending on your business structure and the nature of each expense.
The most important thing to keep in mind with deductions is to keep good records. It’s essential for all businesses to keep records of business transactions including expense claims. Keeping track of all your transactions and expenses and having them readily available come tax time will significantly help you.
You can claim a deduction for most expenses as long as they are directly related to earning your assessable income. Working or operating expenses (such as office stationary and wages) can be claimed in the year you incur them. Other expenses such as capital expenses (buying plant and equipment) can be claimed overtime. There are different rules relating to expenses you can claim in the year you incur them and expenses you can claim over time. The best way to get your head around this is to chat to your accountant.
One of the main deductions businesses can make is for motor vehicles. This will depend on the business structure you operate under, the type of vehicle used, and whether you use it for private purposes.
Another expense you can claim is business travel expenses. This is for those who traveled as part of their work. It’s essential you keep records and written evidence of all expenses incurred.
You can also claim a deduction for the decline in value (or depreciation) of capital assets. These include motor vehicles, furniture, and plant and equipment. There are two sets of rules you can use to work out how much you can claim for depreciating assets- uniform capital allowances and simpler depreciation for small businesses. Both sets of rules have their own merits and eligibilities. Small businesses with aggregated turnover of less than $2 million can select the set of rules they prefer.
If you operate your business as a company or trust, you can claim a deduction for salary and wages paid to employees, and for super contributions you make to a complying super fund or retirement savings account for them. If you’re self employed, you can claim a deduction for your own super contributions.
If your business makes a loss, you can carry forward that loss and may be able to claim a deduction for it in a future year. Please note the rules vary for this depending on your business structure.
Many businesses now run all or some of their business from home. You may be able to claim deductions for rent, rates, insurance and utilities. This will all depend on if your home is your place of business and if you have an area set aside exclusively for business activities.
Finally, you may be able to claim repairs, maintenance and replacement expenses. This may include repairs to machinery, tools or premises you use to produce business income as long as they are not capital expenses.
If you have any further questions on what deductions are available for businesses, please don’t hesitate to get in touch with us here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
