21 Nov 2009

Australian Small Business Tax Deductions

by Darren

So how can a small or medium business determine their allowable deductions in Australia? Any expense that you incur must be directly related to earning assessable income before you are entitled to claim it as a deduction. Common deductions that can be claimed include: Advertising expenses Are eligible for a deduction if you incur these to:
  • sell you inventory,
  • hire employees or
  • gain publicity of your business name
Business travel expenses These are deductible if you have:
  • written evidence of all expenses
  • travel records, if your business travel was for six or more consecutive nights away from home.
Fringe benefits tax Can be claimed as a deduction for the costs you incur when you provide a fringe benefit to an employee including any fringe benefits tax you pay. Expenses related to your home work area If you operate your business from home, you may be able to claim a deduction for:
  • occupancy expenses, such as rent, mortgage interest, rates, land taxes and house insurance premiums
  • running expenses, such as phone, internet fees, depreciation of office furniture and equipment etc.
If your home is your place of business and you have an area set aside exclusively for business activities, you may be able to claim both running and occupancy expenses. If you carry on your business elsewhere and also do some work at home, you cannot claim occupancy expenses even if you have a home work area set aside. Phone expenses If you use a phone solely for business, you are entitled to claim a deduction for the phone rental and calls, but not for installation costs as these are capital in nature. If you use a phone for both business and private calls, you can claim a deduction for business calls and part of the rental costs. The following formula can be used to determine the percentage of phone rental expenses you can claim. (Number of business calls made and received x 100) / Number of total calls Super contributions (pension fund for those who are not Australian) You are entitled to claim a deduction for super contributions you make for yourself or your employees to a complying super fund or retirement savings account. Salary and wages If you operate your business as a company you can claim a deduction for any salary and wages it pays to you or any other employees. If you operate a partnership or sole proprietor then only salaries paid to employees are deductible. Salaries paid to the [partners or your self are not deductible. Tax-related expenses You can claim the expenses you incur in managing your business taxes. These expenses include:
  • Bookkeeping costs associated with preparing your business records
  • Fees for preparation and lodgement of tax returns and activity statements
  • Costs relating to objecting or appealing against an assessment
  • Costs associated with attending a Tax Office audit.

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