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Running a small business in New South Wales (NSW) can be challenging, especially when it comes to managing finances and taxes. Many small business owners overlook valuable tax deductions that could significantly reduce their taxable income. In this blog, we'll highlight ten common tax deductions you might be missing and provide detailed advice on how to claim them. Understanding these deductions can help you save money and keep your business financially healthy.
1. Home Office Expenses
Question: Can I claim home office expenses if I work from home?
Answer: Yes, you can!
If you operate your business from home, you can claim a portion of your home office expenses. This includes utility bills, internet, phone, and even rent or mortgage interest. To claim these expenses, you need to calculate the percentage of your home used for business purposes based on floor area. Keep detailed records and receipts to support your claim.
2. Vehicle Expenses
Question: How do I claim vehicle expenses for my business?
Answer: There are two methods to claim vehicle expenses: the cents per kilometre method and the logbook method.
The cents per kilometre method allows you to claim a set rate per kilometre for business travel, while the logbook method involves keeping a logbook for a 12-week period to determine the business-use percentage of your total vehicle expenses. Your motor vehicle logbook is valid for 5 years. If you travel for six or more consecutive nights, you may need to keep a travel diary. Remember, commuting from home to work is not considered business travel.
3. Depreciation of Assets
Question: What is depreciation, and how can I claim it?
Answer: Depreciation allows you to spread the cost of a business asset over its useful life.
You can claim depreciation on assets such as computers, machinery, and office furniture. The Australian Taxation Office (ATO) provides depreciation rates and methods. Small businesses can also benefit from the instant asset write-off scheme, allowing immediate deduction for assets costing up to a certain threshold.
4. Business Travel Expenses
Question: Can I claim expenses for business trips?
Answer: Yes, but ensure the travel is directly related to your business.
Expenses such as flights, accommodation, meals, and incidentals can be claimed. Keep detailed records of your travel itinerary and the purpose of each trip. If you travel for six or more consecutive nights, you may need to keep a travel diary. Mixing personal and business travel can complicate claims, so ensure clear separation. Additionally, keep records for five years.
5. Professional Services
Question: Are fees for professional services tax-deductible?
Answer: Absolutely!
Fees paid to accountants, lawyers, and consultants for business-related services are deductible. The key is that the services are required to produce assessable income within the course of carrying on a business. Whether it's for legal advice, financial planning, or marketing consultancy, these expenses can be claimed. Make sure to retain invoices and documentation for all services, and keep records for five years.
6. Insurance Premiums
Question: What types of insurance premiums can I claim?
Answer: You can claim premiums for business-related insurance policies.
This includes public liability insurance, professional indemnity insurance, and even worker’s compensation insurance. However, personal insurance policies, such as life insurance, are not deductible. Be aware that personal insurances are not tax deductible within the business and may incur fringe benefits tax if paid by a company for its employees, as these are personal in nature. However, individuals can claim tax deductions for income protection insurance.
7. Superannuation Contributions
Question: Can I claim superannuation contributions for myself and my employees?
Answer: Yes, you can!
Employer contributions to employee superannuation are deductible. Additionally, if you make voluntary contributions to your own superannuation fund as a business owner, these can also be claimed.
8. Marketing and Advertising
Question: Are marketing and advertising expenses deductible?
Answer: Yes, marketing and advertising costs are fully deductible.
This includes expenses for online advertising, social media campaigns, print ads, and promotional events. Effective marketing can help grow your business, and claiming these costs can reduce your taxable income.
9. Training and Education
Question: Can I claim expenses for training and professional development?
Answer: Yes, provided the training is related to your current business.
Expenses for courses, workshops, and seminars that enhance your business skills or those of your employees are deductible. Keep records of course fees, travel costs, and any related materials.
10. Bad Debts
Question: What are bad debts, and can I claim them?
Answer: Bad debts are amounts owed to you that are unlikely to be paid.
If you've made a genuine effort to recover the debt and it has been written off, you can claim it as a deduction. Ensure you have documentation showing attempts to recover the debt and the final decision to write it off.
Conclusion
Maximising your tax deductions can make a significant difference in your business's financial health. By understanding and claiming these common deductions, you can reduce your taxable income and save money. However, navigating the complexities of tax laws can be challenging, and it's essential to ensure you're compliant with NSW and Australian regulations.
Ready to optimise your tax deductions? Contact Latitude Accountants today to schedule a consultation and let us help you maximise your savings!
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute professional advice. While we strive to ensure the accuracy and relevance of the information, we cannot guarantee that it is free from errors or omissions. The application of tax laws and regulations can vary based on individual circumstances and changes in the law. We recommend consulting with a qualified accountant or tax professional for advice tailored to your specific situation. Latitude Accountants accepts no liability for any loss or damage caused by reliance on the information contained in this blog.