For most small businesses, paying taxes is by far the biggest business expense incurred throughout the financial year. It is therefore so important for small businesses to be aware of all tax breaks and ensure these deductibles are claimed to the extent each year.
In preparation of tax time, take note of these three simple tax deduction strategies that small businesses so often overlook.
- Home Office Costs
There are a host of deductible expenses for small businesses that operate from an office or home location. These include a portion of your electricity bill, your internet bill, your rent, house and contents insurance, and your rates. Repairs to home office furniture and fittings and cleaning expenses may be claimable too.
Other claimable items include depreciation on new computers; phones and printers up to the value of $300; and depreciation on your furniture and lighting costs to the value of 45 cents per hour each hour you spend in the home office. You can substantiate these claims by keeping a four-week diary. These deductibles will apply to you only if you meet specific criteria (e.g. if you only work from home one day per week, these deductibles will not be available to you). Your ITP specialist can help you determine which of these and many other home office expenses you are entitled to claim.
- Vehicle Expenses
If your small business uses vehicles, you can claim work related usage in your tax return. You will need to ensure each method of transport (car, truck, motorbike, etc.) has a current and up-to-date logbook detailing all business related travel. By keeping a consistent 12-week log during the financial year, it will help you to substantiate the business percent usage. Remember, log books are only valid for 5 years.
If you haven’t kept a motor vehicle logbook – don’t panic. You can still make a claim using the cents per kilometre method for up to 5,000 business kilometres. To do this you need to work out how many kilometres you would have travelled purely for work (you cannot claim travel time from home to the office and/or vice versa). Using your vehicle to attend meetings with your ITP consultant also counts as deductible travel.
- Super contributions
By paying all employee superannuation contributions before 30th June, you can claim a deduction in this financial year, even though contributions are not officially due until 28th July. It is important to remember the superannuation must have been paid, cleared in the business bank account and received by the employee’s superannuation fund by 30th June, to be claimed as a tax deduction. Ensure you have up-to-date details of each employee’s superannuation account to make sure there are no delays in making payments.
These are just three tax claims that small businesses tend to forget every year. There are many more similar types of deductibles available for small businesses each financial year, so visit your ITP specialist who will assist you in determining all of the claimable expenses available to you in order to maximise your return.