Top Tax Deductions for Small Business Owners to Remember Before June 30
Table of Contents
Introduction
Motor Vehicle Expenses
Equipment Purchases
Prepayments
Superannuation and Bonuses
Professional Services
Other Business-Related Expenses
Home Office Expenses
Conclusion
Introduction
As the financial year draws to a close, small business owners have a golden opportunity to maximise their tax deductions. Understanding and claiming all eligible deductions can significantly reduce your tax liability and boost your bottom line. This guide highlights the top tax deductions every small business owner should remember before June 30.
Motor Vehicle Expenses
You can claim a deduction for your motor vehicle if you use it for business purposes.
Expenses: You can claim deductions for fuel, maintenance, and depreciation as part of your small business tax deductions. Be sure to keep all your receipts.
Logbook: You will need a logbook to justify the deduction and determine the amount that is tax deductible. You need to keep a logbook for at least 12 continuous weeks to establish a pattern of business use. All mileage needs to be logged, both business and personal, during this time.
Business Usage: This includes driving between your office and clients' offices. If you have a home office, and no other office, you can claim mileage between your home and your clients' offices.
Equipment Purchases
Investing in new equipment for your business can also provide tax benefits. The instant asset write-off scheme allows businesses to immediately deduct the cost of eligible assets.
Instant Asset Write-Off: Under the current scheme, you can instantly write off assets up to $20,000, helping to reduce your taxable income. This is a significant advantage for managing tax return 2024. Remember to only buy equipment if you need it. You need to weigh up the tax savings and the cashflow impact of buying an asset.
Eligible Equipment: This includes computers, machinery, motor vehicles, and tools essential for your business operations. Ensure you keep detailed records of these purchases to maximise your small business tax deductions.
Prepayments
You can claim a deduction for prepaid expenses so long as the expenses will be for no longer than 12 months. The types of prepayments you can claim include:
Insurance
Rent
Subscriptions
Advertising
Professional services
Superannuation, Bonuses and Commissions
You can claim a deduction for superannuation and salaries only once it has been paid.
Superannuation: The funds must have been received by the superfund by 30 June, not just paid on that date. You need to allow enough time to process, generally 1-2 weeks.
Bonuses and Commissions: If you would like to pay a bonus or commission, like superannuation, you must have paid it in the financial year in order to receive a tax deduction.
Professional Services
Hiring professionals to assist with your business operations can also be deductible. This includes accountants, lawyers, and consultants.
Tax Deductible Services: Fees paid for professional services related to managing and operating your business are deductible. Ensuring these professional services tax deductions are accurately documented is crucial.
Ensuring Deductibility: Keep detailed invoices and documentation to support your claims.
Other Business-Related Expenses
One of the broadest categories for tax deductions is business-related expenses. These are costs incurred in the everyday running of your business. Some of the deductions include:
Office Supplies: Items like stationery, printer ink, and office furniture are all deductible. Ensure you keep receipts for all purchases related to your business expenses.
Travel Expenses: If you or your employees travel for work, these expenses can be deducted. This includes airfare, accommodation, and meals.
Depreciation of Assets: Beyond the instant asset write-off, larger assets can be depreciated over their useful life, providing significant long-term tax benefits.
Bad Debts: If you have any receivables that are unlikely to be collected, you may be able to claim a deduction for bad debts, which can help manage cash flow issues.
Training and Education: Costs associated with training and upskilling employees or yourself for business purposes can be deductible and beneficial for improving business performance.
Repairs and Maintenance: Costs for repairs and maintenance of business equipment and property can be deducted, as long as they are not capital improvements.
Donations: Donations to eligible charities and deductible gift recipients (DGRs) can be claimed, reflecting positively on your business’s community involvement.
Home Office Expenses
With the rise of remote work, many business owners operate from home. Home office expenses can be a valuable deduction if properly documented.
Actual Cost Method:
Criteria for Claiming: You must have a dedicated work area in your home to claim these expenses. Home office expenses are an important part of managing work-from-home tax deduction claims.
Types of Expenses: You can claim a portion of your home’s running costs, such as utilities, internet, and even depreciation of office furniture or use the shortcut method.
Fixed Rate Method:
You can claim up to 67 cents per hour worked from home. This covers all expenses including mobile phone, internet, consumables, etc.
There are additional expenses you can claim, such as chairs, desks, and computers. You can claim the full amount if the items cost less than $300, or depreciate them over a number of years if above $300.
Conclusion
Maximising your tax deductions is a smart way to manage your finances and reduce your tax burden. By being aware of the various deductible expenses, equipment purchases, home office costs, and professional services, small business owners can significantly impact their tax liability.
Review your expenses carefully and make sure to claim all eligible deductions before June 30. If you're unsure about any deductions or need help with your tax return, consult with a tax professional to ensure you're getting the most out of your tax situation. Additionally, you can book a consultation with The Accounting Academy for personalised advice and support.
By staying informed and organised, you can make tax time less stressful and more beneficial for your business. Don't miss out on the opportunity to maximise your tax deductions this financial year and make your tax return 2024 a success.
For detailed guidance and to book a consultation, checkout our Tax Consultations and Accounting & Tax services.
