If you are a sole trader or own a company, trust, or partnership, these tips are for you.
What deductions can I claim as a small business?
You can claim back the money spent on equipment expenses that are not private assets, such as tools and clothing. This deduction applies to new and previously used assets, and can be claimed the year that the asset was first installed or used.
For money spent on goods used for both business and private use, you can only claim back the business-related portion of the expense. This means that you must have a record to prove that you use the asset for business purposes, such as receipts or logbooks.
What kinds of items can I claim for?
Tradies running small businesses can claim for items necessary for doing their job, including:
Protective clothing
Generally speaking, you will be able to claim on for protective garments and items that will protect you from the elements when you are doing your job outdoors. Items such as hi-vis vests and steel-capped boots. You can also claim money for accessories such as sunglasses, sun hats, safety glasses, and sunscreen.
Tools
Tools are an integral part of your business and will make up a large percentage of your deduction claims. You are able to utilise the Instant Asset Write Off on certain assets if they fall within the requisite asset threshold (see below for more on this). Assets may include items such as:
- Electric saws
- Drills
- Grinders
- Electric sanders
- Lawnmowers
- Toolboxes
- Computers, tablets, or laptops
- Work lights
- Concrete mixers
- Ladders
You may also be able to claim money for items such as masking tape, drop sheets, oil or replacement machine belts - items needed for the smooth operation of your tools.
What is the Instant Asset write-off?
As a business owner you probably know about depreciation and writing off assets to improve your tax position. What you may not be aware of is the Instant Asset write-off has increased from $1,000 to $30,000 in the last 4 years. This increased limit means the larger business purchases you have been holding off on, (a new work ute, pressure cleaner or generator perhaps) now all can be claimed as deductions in the year you purchase/start using them. If there are some purchases you have made that you are not sure about talk to an Income Tax Professional. For a more detailed explanation of Instant Asset write-off go to the ATO’s website.
What kinds of records should I keep to make claims?
In order to claim expenses you have spent on your business, you must be able to show that you made the initial financial outlay, the exact items you bought, who you bought the items from, and when the purchases took place. Your records must also be clearly set out (either electronically or as a hard copy) and be kept for at least seven years. You may also need to retain records that detail your fuel tax credits and, if you have employees and contractors, records related to their expenses.
Need more tax assistance about your specific trade? Find your local ITP Business Centre today and get a professional maximising your tradie return. It’s worth it.