Tax for small business: what can I claim?

Knowing what you can and cannot claim at tax time can save or cost small business owners thousands of dollars. That’s why it’s so important to be well informed and to have a good accountant who understands how the system works.

So, what can small businesses claim in their annual tax return? Here, we give you a rundown:

Allowable deductions for small businesses

You can claim tax deductions for most costs you incur in running your business, as long they directly relate to earning assessable income. The Australian Taxation Office lists the following expenses as allowable deductions for small businesses in certain circumstances:

• Advertising and sponsorship costs
• Bad debts
• Bank fees
• Business motor vehicle usage, including luxury car leases
• Business travel
• Work clothing and outdoor protective gear
• Commercial website costs
• Parking
• Public relations
• Phone bills
• Education, technical or professional qualifications
• Electricity
• Home office expenses and stationery
• Insurance premiums
• Fringe benefits
• Interest on money borrowed for income tax obligations, employer super contributions, late payment or lodgment of tax, to produce assessable income or purchase income-producing assets
• Legal fees
• Losses from a previous year
• Registered tax agent and accountant fees
• Repairing and maintaining income-producing property
• Salaries, wages, bonuses or allowances
• Subscriptions
• Super contributions for employees, and some contractors paid primarily for their labour
• Tax-related costs
• Tender costs (even if unsuccessful)
• Trading stock, including delivery charges
• Transport and freight expenses
• Travel for relocating employees
• Union fees
• Business premises expenses, including land tax, rates and water usage, and rent or lease expenses.

Small businesses can claim depreciation on capital expenses over time (larger expenses with a longer life or relating to establishing, replacing, enlarging or improving the structure of a business). Examples include computers, electrical tools and furniture.

Small businesses cannot claim:

• Private or domestic expenses
• Entertainment
• Fines
• A deduction for GST credits if you claim these separately on your activity statement.

Additional and unusual claims for small businesses

In 2015, new laws gave small businesses the ability to claim an immediate deduction for assets they had started to use, or had installed ready for use, provided each depreciable asset cost less than $20,000. However, this tax deduction will be phased out at the end of this tax year (June 2017).

Examples included motor vehicles and computer servers. Unusual tax deductions included guard dogs, ping-pong tables and Xbox gaming consoles used in a business. 

Industry-specific tax deductions

There are some items that may seem too obscure to claim on tax but it all depends on the industry. Certain professions can claim tax deductions directly related to their work. Examples include:

• Airline staff: moisturisers and hair conditioners (for abnormal drying of skin and hair when working in the pressurised environment of an aircraft)
• Lawyers: wigs for court
• Police officers: bulletproof vests.

Find a trusted accountant to do your business tax

At LDB, we work with you to determine what tax claims you can and cannot make. With expertise in dealing with small businesses, we know what to look for and can point you in the right direction.

We’ll help you make smart, informed decisions so you can complete your small business tax return accurately and professionally.

Call LDB on (03) 9875 2900 to find out how we can assist you with your small business tax.