As a business owner, you have to deal with numerous challenges and need to seize new opportunities for your business growth. Saving money for a business is an important aspect for every business owner. They often look for new ways to save money, and one way is by claiming potential business tax deductions. In this blog post, we’ll discuss potential tax deductions that you are eligible to claim, and what deductions you can’t claim. Let’s get started:
What Business Tax Deduction Can You Claim?
You might be eligible to claim a tax deduction for business expenses you incur for operating your business if they are associated with earning your assessable income. Types of business expenses you may be eligible to claim deductions for include:
- Day-to-day operating expenses
- Purchases of products or services for your business
- Some capital expenses, such as the cost of depreciating assets like equipment and machinery used in your business.
You may be unaware of these types of expenses that you can claim deductions for, that’s why you can reach out to tax accountants near your area by searching online for ‘tax accountant near me’ as they keep themselves updated with this type of information.
The deduction amount and the time when you are allowed to claim it will be based on the type of expense (for example, some capital expenses can be deducted over time) and whether it is used for a private or domestic purpose for which you need to reduce your deduction. Plus, some expenses cannot be deducted, e.g. fines.
There are some rules for what the ATO accepts as a valid business deduction:
- The business expense must have been for your business, not for private use.
- If your expenses are for both business and personal purposes, you are allowed to claim only the portion that is used for your business.
- You need to have records to prove it. You can get help from a small business bookkeeper to keep track of every business expense.
You can’t claim the GST component of your expenses as a deduction if you claim it as a GST credit on your BAS. You can also claim tax deductions for expenses that are related to safeguarding your staff from safety hazards involved in performing their tasks. For instance, infection from transmissible diseases. This may include face masks, gloves, sneeze or cough guards, hand sanitiser, antibacterial wipes, other personal protective equipment, and other cleaning supplies that are used for businesses.
What Can’t You Claim?
There are some expenses that you can’t claim, such as:
- Entertainment expenses, other than those you offer as a fringe benefit
- Traffic fines
- Domestic or private expenses, such as clothes for your family or childcare fees
- Expenses that are related to earning income that is not assessable
- Payments for which you have not met your Pay As You Go (PAYG) withholding or reporting obligations.
Generally, you are not allowed to claim a deduction for the cost of capital assets that are dealt with under the CGT rules, such as the land your business premises are on.
How Can You Apportion for Expenses that have both personal and business purposes?
You are not allowed to claim deductions for an expense if it is incurred for domestic or personal use. How you apportion is based on how much expenses you incur for your business and the type of expense.
- If you have a home-based business and claim occupancy expenses, you must apportion these depending on floor area and the time your home is used in your business.
- Accounting firms in Melbourne can use different methods to calculate deductions for your motor vehicle expenses based on your business structure and the type of vehicle you are claiming them for.
- You apportion depending on the business and private use of the asset.
- You must keep accurate records to show how you have apportioned your expenses.
Conclusion
Now, you are aware of what you can and can’t claim as a business deduction. However, if you still have any queries, you can get in touch with our Reliable Melbourne Accountants.