Tax Write-Offs That Could Benefit Your Small Business

The end of the financial year is fast approaching, and that means tax bills for the self-employed and tax returns for the employed (hopefully).

It’s one of the downfalls in owning a business, and it can often make minds boggle. The concept of owing tax might increase the financial pressures for some Australian small businesses that are already battling one of the toughest years in their existence. Therefore, it’s absolutely imperative that you have a wizard of a tax agent on your team and all of the knowledge on what you can and can’t claim. The instant asset tax write-off is temporarily increased to $150,000. Here are some expenses you might find that can reduce your tax bill.

Equipment

The end of the financial year is the perfect time to assess what equipment needs to be replaced or introduced to your workplace to maximise efficiency. Maybe you’ve started using hard-to-reach places in your warehouse, or orders are becoming larger and require a forklift? Or perhaps your tools are coming up to their ten years from manufacture date, and you’re needing new ones. Use this time to evaluate if you will be required to invest in equipment any time soon and consider if those purchases are worth making now to bring down your taxable income for this financial year. Eligibility may extend to computer software, tools, personal protective equipment, and hardware. Always consult your tax agent before purchasing and claiming.

Vehicles

The Australian government has thrown the auto industry a bone and increased the instant asset write-off threshold to $150,000. This is fantastic for businesses in the market for a new car or truck, but there are many guidelines surrounding this sweet deal that should be brought to the attention of anyone in the market for a new car. The $150,000 refers to commercial vehicles of which the ATO dubs “anything over one tonne or that can carry at least nine people”. So, if you’re looking to purchase a car that will be used for work, the eligible tax write-off is instantly reduced to $57, 581. The criteria requirements don’t stop there. If you intend to use the vehicle for activities outside of work-related use, the value you can claim is reduced by the percentage of unrelated use. That means if you’re using it as a family car on weekends (2 out of 7 days), that’s 28.5% of the asset’s value that you cannot claim against your taxable income.

Again, this may be the perfect opportunity for your business to put money that might otherwise be billed as tax, into an asset that you can keep. Be sure to discuss any car or truck purchases with your tax agent before making them.

Office Improvements

Your business is only as good as the talent you employ; however, your talent might also be affected by the environment in which they work. Therefore, you must provide an efficient and inspiring workplace that offers excellent ergonomics and refreshing design. A full office renovation can take months of planning and construction; however, there are changes you can make that provide bang for your buck and can be executed in a day.

Installing a green wall can potentially be claimed in your tax return under alterations to a rented commercial building or for marketing purposes, depending on it’s intended use. If you’re unsure of what purpose this might come under for your specific business, check with your tax agent before purchasing. Signage can be an effective way to create a company culture and reinforce brand values, often falling under a marketing expense.

Ergonomics of a workplace also contribute to its functionality and can be the difference between employees enjoying their workspace or loathing it. The option for standing or adjustable desks can help your employees to maintain a healthy posture, reducing any pain or disruptions due to standard-design sitting desks. Quiet and comfortable places for solo work, decked out with the right furnishings contrast well with collaborative spaces, and all depend on the furniture fit-out. Places like Ideal Office Furniture can help to provide solutions for different office nooks that can foster team work or provide a place for some refreshing down-time.

Be sure to get approval from your tax agent of what purchases will be eligible as a tax write-off in your office space.

Home office equipment

If your job involves working from home, your home office inclusions might also be an eligible tax write-off. Now is the time to ensure your set-up is fostering productivity and helping your business to thrive. If you’ve been thinking of buying a new screen to make work more efficient or an improved desk chair for comfort, this could be the perfect opportunity to spend money to your advantage. Officeworks often has incredible discounts around tax time, anticipating the influx of shoppers wanting to increase their eligible business expenses. Making a list of things that you need and then items that you want, along with prices and a priority rating, could be the best way to get your tax agent’s approval first.

Education

Education is essential in the success of any industry, and up-skilling is key to business success! Luckily for business owners, specific courses and workshops are eligible tax write-offs. This one might be more complicated than the products and materials above, so be sure to provide every small detail about the course you’re looking to claim to your accountant, including dates studied (or intended to study), course outcomes, and any previous studies undertaken.

Things To Remember

• Don‚Äôt get into unmanageable debt just for an extra tax write-off.
• Understand what type of business you are running - make sure you are technically classified as a small business if you are adhering to small business claim regulations.
• ALWAYS consult your tax agent before making tax-related business purchases.
• Keep clear records throughout the financial year, so you don‚Äôt miss any key financials.
• Keep all tax invoices and categorise them accordingly.
• Be prepared to show definitive evidence in case you might be asked for proof of expenses.