19 Nov 2009

Tax Deductions

by Darren

The basic formula for calculating income tax is by deducting ``general'' and ``specific'' deductions from the total assessable income. A ``general'' deduction is an outgoing that is connected with income or business activities, and that is not of a capital, private or domestic nature. A capital outgoing would be something like the purchase of a building. Private or domestic in nature refers to items such as the payment of your utilities in your personal residence. These are generally non deductible, however, later I will explain how you can generate deductions for these types of outgoings under the various countries tax laws. A general deduction would include payments for office rent, salaries and office stationary as these are directly related to the generation of income and business activities. A ``specific'' deduction, on the other hand, is an amount that has been specifically identified in the tax legislation as an allowable deduction. Items may include entertainment expenses. These are treated as a specific deduction as there are a number of rules to comply with in order to be able to claim these types of expenses as a deduction, if these rules specified are not met then the expense will not be allowed as a deduction We will look at the deductions available to small and medium businesses in Australia, Singapore, Japan, USA, Hong Kong and China over the next few weeks. I hope that you will be able to use this information to help in your tax planning activities for your business.

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