Tax deductions


5th June, 2019

These 5 tax deductions save small business owners the most at EOFY

The end of the financial year is right around the corner. For small business owners, that means it’s time to think about taxes and how to get the most from your tax return. Here are the top five tax deductions saving small business owners most this year.

Paying tax is often a top business expense, so finding ways to reduce the financial load is essential. The Number One way to do this is to make sure that you actually claim everything you’re entitled to, and itemise deductions properly.

Don’t be one of the small business owners that miss out on revenue savings by overpaying.

In this article, we’re making tax time a little easier for you, with five deductions that can help Australian business owners save the most at the end of the financial year.

READ: How to save tax in Australia – 15 tax minimisation strategies

1. Claim mixed-use expenses

Track everything, even mixed-use expenses.

Most small business owners are relatively comfortable tracking business expenses, but mixed-use expenses – those that have a business and private use – are trackable and can lead to greater deductions.

For example, non-commercial vehicles, personal phones, internet, and travel that has had a business component can all be deducted. For these expenses, keep a log book or diary as well as receipts for associated costs so that these deductions can be considered at tax time.

READ: Tracking expenses: How to keep track of business spending

It’s easy to keep a good record of all your accounts with apps and take photos of your receipts, so you don’t lose or forget to track them.

There may be even more mixed-use expenses to consider if you work from a home office. Thankfully the Australian Taxation Office makes figuring out what you can and can’t deduct here with a nifty Home Office Expenses Calculator.

2. Defer income until July

This is one of those tips that will only save you money in the current financial year but can benefit some small business owners. (It’s not a deduction per se, but can help lessen your tax burden this year.)

Hold off issuing invoices until after July 1, 2019. This puts that income into the next financial year so that you can claim it later.

Conversely, you can bring forward some expenses and pay them early (before June 30, 2019) so that those expenses can count in the current financial year and count toward those taxes.

Prepay rent, insurance, or anything else that is paid annually. (Just note that you’ll have to continue doing this each year or you’ll end up with a gap tax year where you don’t have these expenses at all.)

READ: How long does it take to get a tax return?

3. Claim Google and Facebook Ads

All that advertising you did this year? Claim it!

Most businesses run Google or Facebook Ads to help get customers to their website. Even though these expenses may seem small at the time they can add up.

Advertising is a crucial traffic driver for many small businesses, whether they operate solely online or have a physical location. Go back and look at the budget you set for these ads and your spends to track for taxes. (It’s also a good time to think about how effective these campaigns were and if you plan to use them again.)

Did you know that you pay GST on these ads, and once you reach your limit the GST will be added on-top? Beginning in August 2018, you should have added your GST registration number to Facebook. If you haven’t done it yet, you’ll need to do it before running future ad campaigns.

4. Buy a car

There’s still time to make a fun (and functional) business purchase.

If you’ve had a profitable year, consider buying a new vehicle. The Instant Asset Write-Off is $30,000, which can be applied in full to any commercial vehicle, such as a ute or in part to a non-commercial vehicle.

The Instant Asset Write-Off applies to other bigger ticket business expenses as well, including computers, tools, and any asset under $30,000, whether it is new or used.

READ: How to access the $30k Instant Asset Write-Off on a shoestring

5. Make a super contribution

Super funds are payments set aside for every worker for retirement. But there are other uses as well.

According to the ATO: ‘For most people, super begins when you start work, and your employer starts paying a portion of your salary or wages into a super fund for you. These payments are known as super guarantee contributions or concessional (pre-tax) contributions. Super (including super guarantee from your employer), is your money.’

As a small business owner, you understand super from the standpoint of paying in for yourself and others if you have employees. All super payments must be received by your super fund by 30 June, 2019, to qualify for a tax deduction in this financial year.

You can also put money into super to save for as a deposit for your a home as part of the First Home Super Saver Scheme (FHSSS). The Australian Government introduced a new rule that allows you to save in your super at the lower rate and withdraw it for your deposit. (Please note that you are only allowed to deposit a total of $25,000 into your super each year and only allowed to withdraw a max of $15,000 per year if you are partaking in the FHSSS.)

Understanding super funds, including contributions and withdrawals, can be complicated. But there can be distinct benefits for small business and small business owners if you qualify. Check out the Government’s guide to super for employers or consult a tax professional.

And finally…

Every small business wants to save money at tax time. While it is important to pay your share, there’s no reason to pay more than you actually owe.

READ: 17 commonly overlooked ATO tax deductions

While these tips provide a starting point, it’s important to speak with a professional accountant who will provide you with quality advice for your business. Each year the ATO changes slightly, and what can and can’t be deducted is a moving target.

The best advice is to start early, so the end of the financial year doesn’t sneak up on you too quickly.

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’ circumstances will vary for end of financial year.