Introduction
As a small business owner, it’s crucial to understand and take advantage of the various tax deductions available to you.
When searching for information on the best tax deductions for small businesses or “What tax deductions can I Claim as a sole trader?”, It is important to correctly understand your options, what’s applicable to you and your circumstances, and seek appropriate advice.
This approach will ensure you a) get the most out of your tax deductions and b) comply with ATO rules and regulations to minimise the chance of being audited by the ATO (noting that audits can be random).
By claiming all eligible deductions, you can significantly reduce your taxable income (the amount of income/revenue the ATO will base its determination on the tax payable) and minimise your tax liability (the amount of tax payable, or in other cases, a refund). Here is a comprehensive list of common tax deductions for small businesses and sole traders:
Business premises
Rent: If you lease your business premises, you can claim the rent as a tax deduction.
Mortgage Interest: If you own your business premises, you can claim the interest portion of your mortgage payments as a deduction.
Utilities: Expenses for electricity, gas, water, and telecommunications used for business purposes are tax-deductible.
Vehicle expenses
“Mileage”: If you use your personal vehicle for business, you can claim a deduction based on the number of business kilometres travelled. Keep a logbook to track your mileage and claim the appropriate percentage.
Fuel, Maintenance, and Registration: If you own a business vehicle, you can claim deductions for fuel, maintenance, repairs, and registration fees.
Depreciation
Assets: You can claim a deduction for the depreciation of business assets, such as equipment, furniture, and vehicles, over their useful life.
Instant Asset Write-Off: Small businesses can take advantage of the instant asset write-off to immediately deduct the full cost of eligible assets, up to a certain threshold.
Employee expenses
Salaries and Wages: Salaries, wages, bonuses, and commissions paid to employees are tax-deductible.
Superannuation Contributions: Employer contributions to employees’ superannuation funds are tax-deductible.
Training and Development: Costs associated with employee training, workshops, and seminars are tax-deductible.
General operating expenses
Advertising and Marketing: Expenses related to promoting your business, such as social media advertising, flyers, and brochures, are tax-deductible.
Insurance: Premiums for business-related insurance policies, such as public liability, professional indemnity, and contents insurance, are tax-deductible.
Professional Fees: Fees paid to accountants, lawyers, and other professionals for business-related services are tax-deductible.
Subscriptions: Subscriptions to business-related publications, software, and professional associations are tax-deductible.
Home office expenses
If you work from home, you can claim a portion of your home office expenses, such as rent, mortgage interest, utilities, and internet.
The claimed amount must be based on the percentage of your home used exclusively for business purposes.
Travel expenses
Business Trips: Costs associated with business travel, such as airfare, accommodation, and meals, are tax-deductible.
Conferences and Events: Expenses related to attending business conferences, seminars, and networking events are tax-deductible.
Conclusion
To claim these deductions, it’s essential to keep accurate records and retain all relevant receipts and invoices.
It’s also best to consult with a small business tax advice professional (such as AVA Advisory) to ensure you are claiming deductions correctly and maximising your tax savings.
Contact us today on 1300 181 220 to book a cost-free, obligation-free consultation to discover how we can help you optimise your tax return and design tax planning strategies to get the maximum tax return possible.
