With the government announcing generous new allowances for small business tax claims, it’s more important than ever to comb through the ledger. To help you get the most out of this tax season, ShortPress spoke to Frank Carter – small business owner and managing director of Companion Trading – and tax consultant Philip Smith.
Motor vehicle costs
“Most people with small businesses are usually so busy running around each day, trying to ensure that their business runs as smoothly as possible,” says Smith. “A lot of these small business owners forget that the expense of running their car for business purposes can be claimed as a deduction.
“The simple things like petrol, repairs, maintenance, tyres, and insurance are things we all pay for anyway, but these, or a proportion of these, can be claimed against the tax you need to pay. The proportion is based on how much you use your car for business versus private use.”
There are four different methods for claiming car expenses – 12 per of original value method, one-third of actual expenses method, cents per kilometre method, and the logbook method. Deciding on which one will work for your business depends on how much you travel and how much you paid for the car being used.
If you educate yourself to improve your business, that’s a claimable expense. Not everyone realises that.
“If you educate yourself to improve your business, that’s a claimable expense. Not everyone realises that,” says Carter.
According to the ATO, to claim a self-education expense, you have to have met one of the following conditions when you incurred the expense:
The education maintained or improved a skill or specific knowledge required for your then-current work activities
The course lead to, or was likely to lead to, increased income from your then-current work activities; or
There was a direct connection between the course and your then-current work activities.
If you can establish at least one of these criteria, the expenses you can claim include tuition fees, textbooks, stationery, public transport and car expenses, and even running fees for a home study.
Home office costs
Small business owners can sometimes feel chained to their computers. Emails, data entry, business-related research – these things take time, and according to Smith, all of it is claimable against tax.
“If this is done in a separate room – not on the home dining table or couch – deductions can be made for electricity, gas, telephone, internet and printing,” he says.
“The computer and furniture can be depreciated, stationery – the interest on your home loan, even. As in motor vehicles, one will need to apportion all these expenses against private use.”
Other things that can be claimed as home office expenses include laptops, desktop computers, printers, tablets and accessories like laptop bags.
Other things that can be claimed as home office expenses include laptops, desktop computers, printers, tablets and accessories like laptop bags. It is recommended that a diary be kept for at least four weeks of each financial year, noting the amount of time that home office equipment was used for business purposes.
Getting ahead is tough enough without paying more tax than you need to. The federal budget won’t always be this relaxed, so don’t let this financial year pass you by.
Joel Svensson is a Melbourne-based freelance writer specialising in politics and business.