Small Business Tax Deductions Guide for Australia

Small Business Tax Deductions Guide for Australia

Tax Deductions

[Updated July 10, 2023]

As a small business owner, you are likely well aware of the impact your deductions can have on your taxes, and you do your best to save yourself money during tax time. However, are you sure you are getting all of the tax deductions you deserve this financial year?

Each year, scores of Australian taxpayers miss out on deductions that can offer considerable savings. You owe it to yourself to learn all you can about what you can deduct before lodging your taxes.

Our experienced tax agents have helped thousands claim their small business tax deductions Australia-wide and can help save you more than you thought possible.

Where to Start with Business Deductions?

The first step can be the most difficult, whether climbing a mountain or lodging your business taxes. The first step to a painless tax season started last year with excellent record-keeping.

You need to be able to back up every deduction you take and to do that, your accounting needs to be just right. This is a goal any small business owner would have, but it never hurts to highlight what is essential.

One of the details to take care of is your receipts for business expenses. The Australian Taxation Office (ATO) may ask for proof to back up some expenses. Here are three the tax office will generally watch carefully.

  1. Home Office Expenses – With so many people working partially or totally at home, the ATO is bracing for an onslaught of deductions.
  2. Meals and Entertainment – Make sure to document the details of your meals or outing. It is a smart idea to note the names of those who attended and the purpose of the gathering.
  3. Vehicle-Related Expenses – Deducting the use of your vehicle for business purposes is permissible. According to the ATO, you should carefully log the details of times you used your car for business purposes, including kilometres driven and the reason for the use.

Small Business Tax Deductions You Should Know About

Each small business deduction comes with specific parameters and conditions to be met before applying the deduction to your taxes. See a rundown of the most relevant small business deductions listed by the ATO below:

Deductions for Personal Superannuation Contributions

For those under age 75, it is possible to claim a deduction for personal super contributions made to an eligible super fund. If you are between the ages of 67 and 74, you must have been employed for a minimum of 40 hours over 30 consecutive days during the financial year.To make a personal tax-deductible contribution, you need to submit a valid ‘Notice of intent to claim or vary a deduction for personal super contributions’ form and receive an acknowledgment for a valid notice from the fund in writing.

Fees for Professional Services

You can write off their services if you pay an accountant, bookkeeper, business lawyer, or tax consultant

Business Insurance

Because a company needs insurance to operate, you may be able to deduct some or all of the premiums. Some typical kinds of business insurance that you may deduct include:

  • General Liability
  • Professional Liability
  • Cyber Insurance
  • Commercial Property

Deductions for Your Home Office

To claim a tax deduction for your home office space, the area must be a dedicated home office where the majority of the time is spent doing business-related activities. For example, checking invoices at your dining room table does not make your dining room your home office:

  • The area must be your principal place of business
  • You should have no alternative workspace
  • Repairs to Your Home Office
  • Necessary repairs to your home office, such as replacing a broken door, are deductible as expenses on your taxes
  • Utilities

As long as your home qualifies as a workspace, a portion of your electricity, heat, and water can be part of your deduction. Additionally, your internet connection and phone may be a part of your small business write-offs. If you are a home-based business, this could be significant.

Independent Contractors

If you hire freelancers or subcontractors, you may be able to write off their fees on your income tax return. Carefully document the details of your transactions in case the ATO questions anything.

Accountants working on tax documents.

Website Fees

Your business relies on an online presence to keep up with your competition, so the fees you pay to operate your site may be written off. Usually, this includes:

  • Domain
  • E-commerce hosting
  • Purchasing design templates
  • Rights to use stock photos

Web Services

The numerous services you need to keep your website running well can also be tax-deductible. For example:

  • Website development
  • Tools to improve SEO
  • Sites to manage your social media
  • Email marketing solutions
  • Editing sites

Advertising and Marketing

These critical factors can make or break your business and are eligible as small business tax write-offs. Whether managing your email or placing an ad in the local newspaper, you can deduct the cost of these as ordinary and necessary expenses. The same is true if you hire a digital marketing agency, a professional to design ads, or a copywriter for content, all of these support services are deductible.

Business Accounts and Loan Expenses

Often, a small business owners can claim the fees and interest paid on their business loans and accounts.

Prepaid Expenses

Professional organisation dues, annual fees for permits or licensure, and professional subscriptions are among the prepaid expenses you can claim on your taxes.

Education

As long as the classes are relevant to your business and helping you improve it, you can write off seminars, workshops, courses for certification, and mandatory education. Less formal education can also be deducted if you can show how it relates to improving your business skills.

Deducting Using the Instant Asset Write-Off

What is the Instant Asset Write-Off?

It is a temporary write-off that allows businesses to claim immediate deductions for specific costs that relate to depreciating assets. For eligible companies, this can be a considerable help.

What are the Eligibility Requirements for the Instant Asset Write-Off?

To claim the deduction for new business vehicles and equipment, the business must have an aggregated turnover of no more than $5 billion. Businesses with an aggregated turnover of less than $50 million can deduct the depreciation of new or second-hand equipment.

To deduct the depreciation of the equipment or vehicles, the assets must be ready to use by you for a business purpose between 7:30 pm AEDT on 6 October 2020 and 30 June 2023.

What are the Exclusions from the Instant Asset Write-Off?

  • Some primary production assets
  • Buildings and capital deductible under Division 43
  • Assets that will not mainly be used in Australia to operate a business
  • Assets that will never be used in Australia

If you would like to be sure that you are not missing out on any savings on your taxes, or if you have other questions or concerns, get in touch today The tax pros at My Tax Refund Today can work with you to ensure you save every penny possible.

Disclaimer: This information is general in nature and does not take into account your individual circumstances. For expert advice relating to your specific needs, you can contact one of our registered tax agents. 

FAQs

What is a small business for tax purposes?

From a tax perspective, a small business is usually defined as one with an annual turnover of less than $10 million, except in certain circumstances.

What is the instant asset write-off?

Small businesses (with aggregated turnover of less than $10 million) can immediately deduct the full cost of eligible assets costing less than $20,000.

What is the simplified depreciation rule?

Certain small business entities may elect to use the simplified depreciation rules to work out their tax depreciation claim.

What is the additional 20% deduction for energy-efficient spending?

Small businesses (with annual turnover of less than $50 million) can deduct an additional 20% on spending that supports electrification and more efficient use of energy.

What types of deductions can I claim?

There are many different types of deductions you can claim, including vehicle and travel expenses, work-related clothing and laundry expenses, and more. For specific information, contact the ATO or ask your registered tax agent.

Can I claim home office expenses?

Yes, if you work from home, you may be able to claim a deduction for expenses related to your home office.

Can I claim expenses for my business vehicle?

Yes, you may be able to claim a deduction for expenses related to your business vehicle, including fuel, repairs, and maintenance.

Can I claim expenses for my business travel?

Yes, you may be able to claim a deduction for expenses related to your business travel, including airfare, lodging, and meals.

Can I claim expenses for my business equipment?

Yes, you may be able to claim a deduction for expenses related to your business equipment, including computers, printers, and other office supplies.

How do I know which deductions I can claim?

The Australian Tax Office (ATO) provides a full breakdown of tax deductions you can claim in Australia on their website. Alternatively, you can ask your registered tax agent.

Quick & Easy Tax Refund

Simply fill out the form and one of our Australian tax experts will call you back.

    yes I provide consent and authorise My Tax Refund Today (ABN 87145232319 and Tax Agent 23282009) to add me as a client in the Tax Agent Portal.

      yes I provide consent and authorise My Tax Refund Today (ABN 87145232319 and Tax Agent 23282009) to add me as a client in the Tax Agent Portal.
      Google Rating
      4.7
      Based on 1068 reviews
      ×
      js_loader