It’s almost that time of the year again! For small businesses there may be a sense of dread or trepidation with tax time looming. Nearly all purchases that help in generating income are tax deductible. So here are our 5 top tax tips for small businesses:
1. Home expenses
If you run your business from home (or work from home on a regular basis) then you can claim some of the running costs of your home. You can claim a portion of your water, gas and electricity bills. This is generally for the portion of the house that you are using as an office. You may also claim depreciation of office furniture and work related phone and internet costs.
The ATO has an easy to use home office expenses calculator that you can find here.
2. Getting from A to B
Even if you don’t have a company car or a vehicle for work purposes you can still claim your car expenses. Whether it be to go and pick up some printing or stationary or visit a client there are a number of work related car trips. While most business owners know that their petrol is tax deductible they forget about other expenses such as tolls when driving to see a client and undertake work.
There are two methods for claiming car expenses. The first is cents per kilometre. In 2016-17 this was 66 cents per kilometre and was capped at 5,000km per year. You need to keep a diary of your trips.
The second method is a logbook. You can claim based on the business use percentage of the car. You need to complete a logbook and odometer readings for a continuous 12 week period to determine the percentage of business use. After this you can claim fuel and oil costs and other running costs.
3. Donations
Many businesses donate to local charities. This can be great for engagement of customers, particularly in your local area. As long as these donations are monetary, true gifts (ie. you aren’t receiving anything of monetary value in return) and are made to a registered deductible gift recipient then you can claim this as a business expense.
4. Small business tax rates
If you are under a company structure and have a turnover less than $10 million a year, then your tax rate is reducing! The company tax rate of 30% was reduced to 27.5% in the 2016-17 tax year. In the 2017-18 tax year those earning under $25 million will enjoy the reduced rate of 27.5%.
5. Use a registered and reputable tax accountant
Possibly the most important tip! We don’t expect you to keep up with all of the tax changes and remember all the things you can claim. A good accountant will do this for you. We recommend talking to one of our tax specialist who will ensure that you get the best return and maximise the opportunities for your business finances.
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