When you do your own taxes, as a small business, you can often fall into old habits when it comes to doing your taxes. Which means you aren’t taking advantage of some of the most recent, or less obvious, ATO tax deductions. These can help minimise your take at the end of the financial year.
To keep a healthier bottom line, businesses need to be smarter and sharper about their taxes every financial year. Today we are going to discuss some overlooked ATO tax deductions.
What Can I Claim on Tax?
There are a number of deductions you can claim against expenses related to your business or work. These include things like travel and home offices expenses, education, and internet and mobile phone connection expenses. The list below includes the most commonly overlooked deductions you can claim on your tax. However, it is always best to have a certified accountant check your taxes and individual situation to ensure you are claiming correctly.
1. Prepay Expenses
Every little bit counts when it comes to tax time. By prepaying your expenses, you can attract a tax deduction but this is, unfortunately, often overlooked. Prepay expenses include:
- Subscriptions
- Business travel expenses
- Leases
- Rent
- Training events
- Phone
- Internet
- Business asset repairs
- Insurance
However, these cannot exceed more than one year.
2. Review Asset Acquisition
Does your business need new assets? Now is a good time to purchase them! As of June 30th, 2018, small businesses and sole traders with an ABN can utilise a $20,000 tax deduction for asset acquisition, if their turnover is less than $10 million. These assets can be brand new or second-hand, but they must relate back to your business.
3. Donations and Union Fees
Donations of $2 or more to an appropriate charitable organisation is tax deductible if you have a receipt. Further, if you are a union member and have yearly fees, these are also tax deductible under the D5-Other Work-Related Expenses.
4. Rental Property or Home Office Expenses
Rental property expenses – such as office space – often go unclaimed. The most commonly forgotten deductions are:
- Bank fees
- Lawn mowing
- Gardening
- Pest control
- Security patrol fees
- Bookkeeping fees
- Secretarial fees
- And travel and car expenses for rent collection, property inspections and maintenance
Home office expenses are also often forgotten by sole traders and small businesses. You can claim occupancy costs, the costs of your persona computer, as well as:
- Software
- Furniture
- Equipment
- Lighting
- Heating
- And a percentage of your rent/mortgage
However, there are caveats. For example, you may not get the full, main residence exemption if your home is your principal place of business. This is why it is important to consult a certified accountant, like those at Siragusa, for more accurate claims and information.
5. Internet and Phone Expenses
If you work from home, either partially or full time, and your internet is in your name, then it is possible to claim internet expenses as a deduction. You will need to estimate your monthly work use as a percentage of the total household use, however.
Further, as a business owner or sole trader, you can claim the cost of your work-related calls. This does not, however, mean your entire phone bill. It is important to keep a logbook of calls when you use your personal phone for work uses and determine the average percentage of calls that are work related.
6. Work-Related Car Expenses
Business owners or sole traders who use their personal car for work-related reasons, apart from the commute to and from work, can claim fuel and maintenance costs. However, to be eligible you must be the owner of the car and your travel must be part of your working day. This means driving between offices, special trips to the bank or post office, or from one job site to another, as an example.
7. Accounting Costs
If you use a tax agent, or programs like etax.com.au to prepare or lodge your tax return the previous year, then you can claim that amount on this year’s tax return. This can be placed in the D10 section – “Cost of Managing Tax Affairs”. The fees you pay for tax return help are always tax deductible.
8. Bad Debts and Financial Loss
You can never overlook facing a financial loss, especially this year. It is important to speak to a financial advisor – like those at Siragusa – to discuss how you can minimise the impact. They can advise you on what can be done to help offset the loss on incomes, salaries, and wages. You also need to prove that you have made a genuine attempt to recover bad debts that may have arisen.
A good financial advisor can explain how to document debt as evidence of the amounts that were written off before the end of the financial year. You are also entitled for tax deductions for insurance premiums against the loss of income. This does not include life insurance, trauma insurance or critical care insurance, however.
It is also important to review your stock and identify any damaged or obsolete stock. This can be written down or written off. This impacts the value of trading stock and your profit margins. By taking the value of your stock into consideration every financial year, you may be entitled to a tax deduction when the opening stock exceeds the closing stock.
9. Self-Education Deductions
If there is a connection between the course and your role in the business, you can claim self-education expenses. You may be entitled to a tax deduction for expenses including:
- Textbooks
- Professional and trade journals
- Photocopying
- Computer expenses
- Stationery
- Student services, amenities, and union fees
- Allowable travel expenses
- Running expenses if you have a room set aside for self-education purposes
- This includes the cost of heating, cooling and lighting the room you are studying in
- Accommodation and meals, only when your course requires you to be away from home 1 or more nights
Self-education expenses are broken into five categories, so it is important to have an accountant review them, to ensure you are asking for the right deductions.
10. Laundry and Sun Protection Expenses
Did you know you may be able to claim laundry and sun protection expenses, depending on our industry? You can claim the deduction for the cost of buying and cleaning occupation specific clothing, protective clothing, as well as unique, distinctive uniforms. This allows you to use a reasonable basis to calculate an amount to claim as a tax deduction, for example: $1 per load of work-related clothing, or 50c per load if other laundry items are included.
You may also be entitled to ATO tax deductions for sunglasses if, as part of your work, you are required to work outside for prolonged periods. While there is no limit to what you can spend on sunglasses, if they are more than $300 the ATO may expect they should last for more than 12 months, meaning you should claim depreciation on the glasses, rather than an upfront deduction.
Unsure if you are claiming all you can on your tax return? Are you looking for financial advice or help finding ATO tax deductions? Contact the team at Siragusa today for the best in accounting and financial advice!