Save me the money!!!
Mar 18, 2019
#1 Questions I get asked: What can I deduct for tax?
This blog is going to answer that question for those of you running small companies. Fortunately for you, the tax office is pretty forgiving, so majority of the expenses you incur in running your business can be deducted for tax.
This includes but is not limited to:
- Accounting, Bookkeeping, Legal & Consulting
Yay – you can deduct any fees you pay to people like me!
- General Administration
Printing, Stationary, all that good stuff!
- Motor Vehicle & Travel
Petrol, repairs and maintenance!
- Freight & Postage
Stamps, express post and other freight charges!
- Computer Expenses
Depreciation on new technology!
Applications such as Photoshop!
- Software Subscriptions
Online subscriptions like Spotify, Xero and Receipt Bank!
- Telephone & Internet
Landline, mobile, internet dongles, hotspots and all the rest!
- Rent & Utilities
Electricity, gas, you get the picture...
- Home Office Expenses
If you run your business from home you can claim a % of these costs based on your business use of the house!
Given majority of what you spend is required for the operation and success of your business it’s likely that if you can think of a cost, it can be deducted. Be sure to separate personal and business expenses though, personal expenses follow different rules.
Let’s have a look at some of the common non-deductible business expenses:
- Entertainment Expenses (there are a few exclusions, so do your research)
- Unfortunately the ATO doesn’t want to fund your 3-a-day martini addiction (I know, it’s not fair – I need that kick to run my business too)!
- Think of things like personal magazine subscriptions that aren’t relevant to your work.
- Fines & Penalties
No brainer yea?!
- Capital Expenses
This requires a bit of an explanation (in depth version in my online course!).
So capital expenses are bigger purchases such as new vehicles, computers, equipment, machinery etc. which are used in your business. The law states that these are not deductible instantly like most expenses. Rather you depreciate them over time. So you get the tax benefit over the life of the asset (unlike an expense which is consumed in a moment).
At the moment (until at least June 2018 – fingers crossed it gets extended) small business owners (turnover < $10 million) can immediately deduct these expenses even if they are valued up to $20,000!! That’s huge!! If/when this ‘instant asset write-off’ rule goes away this threshold drops from $20,000 to only $100!!
Now this is not a comprehensive list but it should get the juices flowing. These are certainly the most common deductions mentioned, with a few extras thrown in for good measure.
If you have specific questions about what is or is not deductible, feel free to email me or reach out on the social and I’ll try to get back to you.
Don't forget - deductions are not about avoiding tax. It’s all about paying the right amount of tax and not a cent more 😊