3 Most commonly missed small business Tax Deductions


Tax Time is here. When you're finalizing your annual tax return, make sure you take advantage of all the deductions that you can claim. Being an accounting firm we see alot of forgotten tax deductions and these can have a huge impact on your return especially for small to medium businesses. The more you claim the more money left in your pocket.

Here are a few most commonly missed business deductions.

The Home Office Deduction

If you work at home using a home office which is separate from your private home, you can claim deductions for the additional expenses you incur by working from home. Below is a list of possible expenses you can claim as a deduction:

Occupancy Expenses:

Occupancy expenses relate to the ownership/use of the home.

You can only claim occupancy expenses if your home office has the qualities of a “Place of Business”.

Here are some things the ATO will look for to determine if your home office is a place of business:

  • Is the area clearly identifiable as a place of business;

  • Can the area can be readily adaptable for private or domestic use within the home;

  • Is the area used exclusively as a place to carry on the business;

  • Is the area regularly visited by clients or customers;

  • Is there is an absence of an alternative place to carry on the business.

If your home office is considered a “place of business”, you can claim a portion of the home’s occupancy expenses. The portion of the relevant expense is calculated by:

Home Office Floor Area divided by Total Home Floor Area; or

Amount of time spent using Home Office divided by Total Time

If you use your home office out of convenience then it will not be classified as a “place of business”, then you cannot claim Occupancy Expenses as a deduction.

Running Expenses:

Running expenses relate to the use of facilities within the home. Only the work-related portion of running expenses can be claimed as a deduction.

Examples include:

  • Heating/Cooling & Lighting:

If you sit with family while conducting work, the ATO classifies the heating/cooling & lighting expense as private in nature and not deductible. If you use a separate, dedicated room for work activities, then the additional heating/cooling & lighting expense incurred can be deductible.

Calculate the deductible amount by:

1. Keeping records showing the amount of the expense, and the work-related portion of the expense

2. Home office rate

  • Depreciation:

Home office equipment (computer, office furniture, printers, etc) depreciation can be claimed as a deduction. Home office furnishings can also be claimed as a deduction. Calculate the deductible amount by using:

1. Cost Write Off (for items costing up to $300); or

2. Decline in Value (for items costing more than $300); or

3. Home Office rate (45 cents per hour).

  • Work-Related Phone Calls:

Can be deductible if you can show you: are on call; or must phone your employer or clients regularly while you are away from your workplace.

  • Cleaning Expenses

  • Repairs to Home Office

Startup Costs Deduction

Start up costs are some of the most common deductions that people forget about.

These include :

  • Company Set up Fees

  • Website Development Costs

  • Accounting Fees ie. Xero accounting software

  • Rental costs

  • Printing costs

  • Office Furniture

  • Equipment Purchases/ Stationery

  • Travel Expenses, ie. if you need to travel to another country to visit the factories etc

  • Petrol deductions.

Bank Fees

If you have a small business, you should also have a separate small business bank account. With that bank account also comes a second set of banking fees. These fees can include charges for checking accounts, ATM withdrawals, and other bank-related services, as well as interest charges, overdraft fees, and accounting fees. All of these banking fees for your business bank accounts are fully deductible as business expenses.

Disclaimer

This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice.


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