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Tax Deductions for Your Business

close up upper body of accountant and client working on laptops looking to claim tax deductions

If the words “tax return” send you into a cold sweat, you’re not alone. But it’s worthwhile applying great focus on making the most of your tax deductions. Knowing what to claim on tax can help you greatly as a small business.

While it’s not exactly free money, knowing what you can and can’t claim back as tax deductions can help your bottom line. Your tax return, when done properly, is all about understanding what you can and can’t recoup via the Australian Tax Office. Anything that you can claim back, you should – because it’s money which is rightfully yours.

So, here are some common things pest controllers and building inspectors can and can’t claim on tax when it’s time to submit your return. Which isn’t too far away – so get started now…

What expenses can I claim as a tax deduction?

You can claim on the vast majority of expenses involved with running your business. But before you start trying to claim dinner and drinks with your ‘business contacts’, keep in mind that anything you claim for must:

  • be directly related to earning your income
  • be a business expense, not a personal expense
  • have supporting records or documentation

Visit the ATO’s business tax deduction page for complete and detailed information on the expenses that you can and can’t claim back from tax. Your accountant will also give you all the information you need. Ask as many questions as you like; they’re there to help you make the most of your business’s financial situation.

In the meantime, here are some categories in which you might be able to claim a tax deduction:

  • Motor vehicle expenses
  • Business travel expenses
  • Home office expenses
  • Employees’ wages and super contributions
  • Expenses related to property/asset repairs, maintenance, and operations
  • Depreciating assets such as phones, computers, and furniture

Let’s look at some of these in a little more detail.

Tax deductions on your car

In your line of work, you’re probably on the road quite a bit. Which, by the way, is why you should read our article on the best apps for working on the go.

Here are some of the costs you can claim on tax when using your car for business:

  • Travelling between two different places of work, e.g. from your office to and from job sites and/or customer meetings
  • Running business-related errands
  • Lease payments
  • Servicing, maintenance and pink slip
  • Business vehicle insurance premiums and registration

Note that commuting from your home to your place of work isn’t a deductible trip, and keep in mind that carrying tools does not necessarily make a commute a business trip.

There are two ways to keep track of your work-related car travel: cents per kilometre method, or keeping a logbook.

Cents per kilometre vs logbook

Which is best for you? It depends. Ugh, not a very helpful answer, right? Well, here are some guidelines to help you decide which method might be best.

Cents per kilometre:

  • This is based on a set rate of 72 cents for each business kilometre you travel.
  • You can claim up to 5,000 kilometres per year, per vehicle.
  • The claimable amount is calculated by multiplying the total business kilometres travelled by the standard rate and it considers all operating expenses, including depreciation of the vehicle’s value.
  • You don’t need written evidence, but you must be able to show you’ve driven the kilometres claimed. You’ll also need to show how you worked out the total business kilometres so keeping your fuel slips and having a logbook for business travel is never a bad idea.

Logbook:

This is based on the percentage you use your car for business, which means you need to document every trip you take, not just business ones.

  • You claim based on the percentage of kilometres driven for business trips.
  • There is no maximum amount of kilometres you can claim.
  • Your business use percentage is calculated by taking the total number of annual business kilometres, then dividing by overall total kilometres driven and multiplying your answer by 100.
  • You need clear written evidence in the form of a logbook that includes a log of each business trip taken, kilometres travelled, odometer readings at the start and end of the journey, and the reasons for the trip.
  • The logbook musts be kept for a minimum 12 weeks (which needs to be representative of your business travel across the year) and each logbook is valid for  five years, though you can start another at any time.
  • You’ll need to keep all receipts to validate your claim. This includes going beyond kilometres travelled and into insurance, registration, servicing and repairs.

The logbook method is much more detailed, but might be suitable if you do a lot of travelling for your job. Which is likely in our industry!

person using macbook with charts for tax income deductions

Tax deductions on home offices

Just as you can with an away-from-home business premises, if you work primarily from home you can probably claim back a range of property expenses. Say you have a home office where you take customer calls and do admin work, for instance. A portion of your rent or mortgage and utility bills can be claimed back to cover this, among other things.

Speak to your tax advisor for clarity around claiming on home office expenses. However, generally, they are split into occupancy and expenses. This means you might be able to claim back on some or all of the below:

  • Occupancy expenses such as mortgage interest rates, rent, rates, and property insurance premiums.
  • Utility bills such as lighting, heating, and water. If you use aircon to keep your home office warm or cool, have running water for a bathroom, and use electricity for lights, computer, etc, then these are all running expenses related to your business. You can probably claim a portion of these household utility bills on your tax return.
  • Home office equipment is necessary to run your business. So, items like computers, an office chair, a phone, or printer are usually claimable. Generally, you can claim the full cost for items up to a certain dollar amount. For more than that, you can claim them as depreciating assets (more on that later!). But if you run your own business, you might be able to immediately write off the tax on assets – up to a certain amount. Read more about that here.
  • Phone bills. You can claim a portion of your phone bill or mobile rental, as long as the costs are related to work calls such as phoning staff, suppliers or customers.

Claiming back on depreciating assets

A depreciating asset is one which has a limited lifespan, and which declines in value over the time it’s used. Business owners can claim a tax deduction on the decline in value of such assets. Read the full guidelines to tax deductions on depreciating assets from the ATO here.

The type of assets you might look to write off will vary depending on your line of work. However, they could include items such as:

  • Machinery, appliances, or other tools and equipment used to conduct your business
  • Computers
  • Phones
  • Printers, ink, and paper
  • Office furniture
    While you’re checking out your assets, revisit what it is you really need by reading our tips on reducing your business costs.

Tax deductions related to other expenses

Here are some other costs that you might be able to claim tax back on:

  • Professional development, such as relevant courses or qualifications like Rapid Training offers
  • Marketing and advertising expenses (read our article on property services business marketing for some ideas)
  • Business accommodation and business meal expenses
  • Uniform purchase and cleaning

Note that it is always best to work with a tax professional if you’re not confident in your ability to gain the most out of your tax return. Why not support another local business owner and get them to help you out in making the most of tax time?

You’ll receive advice specific to your circumstances and will be able to focus on what you do best: running your business.

Business insurance and tax

While we’re talking about saving money, have you checked out your insurance yet? Making sure you’re properly covered can save you thousands (or more) in the event of a claim.

And yes, your general liability insurance and professional indemnity insurance premiums are tax deductible too. Rapid Solutions provides you with a tax invoice each year, and you just need to keep this for your records. If you’re not currently insured with Rapid, why not consider making the switch?


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