Did you know that you can claim deductions for some of the income-related expenses you incur in your business?
To claim your business expenses, the money must have been spent for the business. In case of a mix of private and business use, you can still claim the business-related portion of it. It is also important that you have records to prove the expense. These business deductions are claimed in your business entity’s tax return or personal tax return for sole traders.
What you can claim
Generally, business owners can claim operating expenses in the year they incur them, including wages and office stationery, as well as capital expenses such as machinery and equipment. In some cases, you may also claim a deduction for prepaid expenses, such as goods or services that you will receive in a future income year.
Operating expenses are generally incurred when there is a current legal obligation to pay for goods and services. While an invoice is not required, a record of the expense incurred is necessary to claim. For items used in the business for only part of a year, the claim may be restricted to the period it was used for the business.
There are several concessions available to small businesses, such as payment and reporting options which apply to sole traders, partnerships, companies and trusts. To apply for a small business concession, check if you are eligible each year as there are several eligibility requirements for different concessions.
Meanwhile, some expenses that are not deductible are entertainment expenses and traffic fines, domestic or private expenses, including child care fees or clothing for the family, expenses related to a non-assessable income such as from a hobby and the GST component of a purchase that is claimed as a GST credit on a business activity statement.
Note that most incomes are assessable for tax purposes, including gross earnings, proceeds from your business, net capital gains, foreign income and even money owed to you and value changes in trading stock. Assessable income does not include GST.
As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision. You can click here to speak to experts who specialise in business tax and consultancy. We would love to help you formulate investment strategies and streamline your processes to take your business to the next level.
Sky Accountants specialise in small business tax. We can keep track of the profits and taxes of your business to avoid surprises at year end and develop tailored strategies and systems specifically for your business to streamline your bookkeeping and accounting.
Our vision is to allow you to focus your energy and enthusiasm for your business and save time and money at the same time through our low cost, efficient systems with fast turnarounds. We ensure accuracy and that all the deductions and offsets available to you will be secured.