A lot of little deductions can add up to a big refund. If you run a small business, almost any purchase that helps generate income is tax deductible.
While you’ll need to be careful to ensure that these expenses are genuinely claimable, they are commonly overlooked and could save you come tax time.
GOOD DOG Canines aren’t just man’s best friend. They can also be a tax deduction. If you have a dog that safeguards your small-business site, you can claim food, vet bills and the cost of buying the animal. Make sure the breed is up to the task. A German shepherd is an indisputable guardian of the home office or workplace; a poodle not so much. The deduction also applies to working dogs on farms.
NICE HANDBAG If you carry your work laptop in a designer handbag, it’s effectively a laptop bag — and that’s tax deductible. You should use the bag primarily for work, and its price should be a reasonable proportion of your business revenue. While there are no ATO thresholds here, claiming a $3000 Prada on yearly turnover of $100,000 might look unreasonable. But a $200 handbag should be fine. On the other hand, if your revenue is $2 million a year, that Prada may well be justifiable.
BE SUN SMART If you’re running a landscaping business, you can claim sunscreen and makeup that has an SPF factor. Both offer protection from harmful UV rays. The same goes for sunglasses. These can be a smart deduction if you have a small business that puts you behind the wheel for long periods, such as truck driving. Buy a quality pair that are polarised.
Education and training are tax deductible, even if they’re outside of your nominated profession. Independent lawyers can take acting classes to improve their courtroom performances, and claim the cost of tuition. A plumber can take a TAFE course in marketing to learn about expanding his business. As long as the training will help you run the business better, you can likely claim the cost.
STEP INTO MY OFFICE When you run a business out of your home, you can claim some of your electricity, water and gas bills, as well as home-insurance premiums, provided the policy covers business use. The amount claimed is often based on floor space of the home office. You might also deduct some of your council rates and mortgage interest, though this can create capital-gains tax implications when you sell the house.
Look for deductions even if you don’t work at home. Many self-employed tradies store their trucks and tools in a garage at night. If those take up 10 per cent of the home’s floor space, the tradie may be able to claim a similar per cent of his home running and occupancy costs mortgage or rental costs (still keeping in mind the capital-gains caveat).
ON THE ROAD If you travel to remote locations to work for extended periods, you may be able to claim the costs of a caravan or Winnebago. Full-time builders sometimes spend weeks or months on a job site and run their operations out of a Jayco. It’s no different than renting a hotel room. If you use the caravan for holidays too, that portion won’t be tax deductible, but the rest will be. Take advantage of the $20,000 instant write-off, or depreciate the cost of the vehicle over time. Don’t forget to claim maintenance expenses too.
FROM HERE TO THERE Most business owners know petrol costs are tax deductible, but many neglect to claim highway tolls when they’re driving to a client site to undertake work. They can also forget to deduct the cost of train and bus tickets when they take public transport to a job. The simplest way to avoid this mistake is to get a business credit and use it exclusively when buying train or bus fare.
If you travel via Uber, create a Business profile in the app and track your work trips easily. And if your business takes you into the air, remember you can claim the cost of membership fees for Qantas Club, Virgin Lounge and the like.
LAST BUT NOT LEAST Your accountant’s fees are tax deductible. Even the travel costs to visit your tax agent and talk about this article is claimable. Likewise, you can deduct the cost of accounting software.
James Solomons is head of accounting at Xero