Chartered Accountants & Business Advisory

TAX DEDUCTIBLE BUSINESS EXPENSES

White paper with text Tax Deductions on a yellow background

Tax deductions can be extremely helpful when looking to minimise the amount of income tax a business has to pay. And there are many different tax deductible expenses available to business owners.

The ATO states:

“There are three golden rules for what we accept as a valid business deduction:

  1. The expense must have been for your business, not for private use.
  2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
  3. You must have records to prove it.”

With these rules in mind, we have outlined a selection of deductions that could be applicable for you this tax season. Remember that you have to retain the relevant invoices and accounting records relating to each deductible expense.

Passenger in an airport lounge

Travel expenses

While the global pandemic has severely impacted international travel during FY20-21, it is possible that you have still incurred travel expenses domestically. These expenses can include flights, hotel accommodation, car hire or other transportation such as taxis or public transport.

If you have hired a car, then tolls and fuel costs are also deductible under the travel expenses classification. And if you travelled overnight, then you can also include your meals.

Expenses that you cannot claim include sightseeing, costs relating to taking a family member away with you or gifts and souvenirs.

Business contract agreement

Insurance

The ATO declares that operating expenses are deductible and insurance is recognised as a general business operating expense. The types of insurance that you can deduct include:

  • accident or disability
  • fire
  • burglary
  • professional indemnity
  • public risk
  • motor vehicle
  • loss of profits insurance
  • workers compensation.

You can claim a deduction for your insurance premiums in the same income year that you pay them, but you must make sure you retain all your records.

The photocopier or network printer at the office

Office supplies and equipment

Another segment of operating expenses is your office supplies and equipment. Here you can deduct a whole range of items… of course it is your stationery – pens, paper, printer ink, but it also includes the purchase or lease of computers or devices, any computer related accessories such as a keyboard, mouse or USB stick as well as the software you run to manage your business.

Plus, don’t forget the office furniture, the plants at reception and even the industry magazine subscription.

If your office has a kitchen area that your staff use, then consumables such as milk, coffee, tea and your weekly fruit delivery are also deductible. But note that if you run your business from home these items may not be applicable. Speak with your accountant to confirm whether you can include them in your business deductions.

Man hand holding smart phone

Phone and internet costs

When it comes to your business phone and internet services, these are all deductible… as are any accessories such as a phone cover, earphones or Wi-Fi extender for the office.

But if you use your mobile phone for both business and personal use, you will only be able to claim a portion of your costs.

The same applies to internet services: if you run your business from home, then you can only claim a portion of your internet usage fee.

Professional service fees

Professional service fees such as accounting, bookkeeping or legal costs are all deductible if they are necessary to your business operations. This not only includes the personal services but also any software related to these functions. For example, if you use Xero to manage your accounting, then your monthly subscription fees qualify as a tax deduction.

Group of business people smiling at the camera

Ask a professional

This is only a small selection of the ATO admissible business tax deductions. There are many more opportunities to minimise your tax liability and we recommend seeking professional advice to make sure you don’t miss out.

The team at Alliance Accounting is here to help, so if you have any questions or would like to discuss your existing business tax obligations please contact us today.