What are Operating Expenses?
Operating expenses are expenses you have to pay for or have paid for in the everyday running of your business. Here are some examples of operating expenses: renting premises, office stationery, and the purchase of trading stock. These expenses are known as revenue or working expenses. You are generally allowed to claim operating expenses related to running your business in the same income year you incur them. Make sure you have accurate financial records of these operating expenses as they occur. However, keep in mind that you can only claim the business portion of these expenses if they are related to both personal and business use. It would be a great option to choose accounting services to know what operating expenses you can claim as a deduction.0
What are General Business Operating Expenses?
Here are the most common operating expenses in business:
- purchases of trading stock, including delivery charges
- sponsorship and advertising
- public relations
- legal expenses, such as those incurred defending future earnings, discharging a mortgage, borrowing money, or obtaining tax advice
- tender costs, even if the tender is not successful
- bad debts
- bank fees and charges
- annual fees charged by statutory bodies
- fines and penalties imposed by statutory bodies due to breaches of an Australian law are not deductible
- insurance premiums, including disability or accident, burglary, fire, professional indemnity, motor vehicle, public risk, loss of profits insurance, or workers compensation
- interest on borrowed money for
- generating assessable income or buying income-producing assets
- income tax obligations, late payment or lodgment of tax, or employer super contributions
- lease expenses
- stationery
- small-value mobile phones and tablet accessories
- for instance, earphones and protective covers
- expense for running a commercial website
- for instance, content updates and site maintenance
- internet service provider fees
- subscription fees for off-the-shelf software
- freight and transport
- waste removal and recycling
- parking fees
- small-value goods costing $100 or less.
Other Expenses (similar to those claimed by employees)
As a business owner, you can claim deductions for some business expenses similar to those claimed by employees, including:
- union dues and subscription fees to trade, professional or business associations
- clothing expenses (corporate uniforms or wardrobes and occupation-specific and protective clothing)
- expenses related to education and technical or professional qualification
- subscription costs for professional or business journals, newspapers, information services, and magazines
- costs for sunhats, sunglasses and sunscreen when your business activities need outdoor work
- other items that protect you or your employees from injury or health risk in your work environment
- donations and gifts to companies that have a deductible gift recipient status.
Operating Expenses from Employing People
Costs related to employing staff, including:
- Salaries, wages, and superannuation contributions
- Fringe benefits provided to employees, along with any associated fringe benefits tax (FBT)
- Protective clothing is needed for employees to perform their duties
- Allowances or reimbursements for employees who use their personal mobile devices for work
- Relocation travel expenses for employees
- Financial losses resulting from employee or agent misconduct, such as fraud, theft, or embezzlement
Business Premises Operating Expenses
Operating costs for your business premises may include:
- Electricity
- Landline phone calls and line rental
- Mobile phone expenses (prepaid or plan-based)
- Internet service charges
- Data plans
- Cloud storage fees
- Water
- Rent or lease payments for business premises
- Council rates
- Land tax
If you incur costs when setting up and using your Digital ID to access online government services as part of running your business — such as phone or internet expenses — you may be able to claim a tax deduction for the business-related portion of those expenses.
Tax-Related Operating Expenses
Tax-related operating costs may include:
- Fees paid to registered tax agents or accountants
- Expenses connected to managing your business tax affairs, such as:
- Engaging a bookkeeper to maintain business records
- Preparing and lodging tax returns and activity statements
- Lodging objections or appeals against an assessment
- Attending an ATO audit
- Seeking professional tax advice for your business
- Credit or charge card processing fees incurred when paying business tax liabilities (for example, GST)
Be sure to keep appropriate records to support and substantiate your claims. You can also seek help from a bookkeeper in Melbourne to ensure organised records.