Small businesses, take advantage this EOFY
Tax deductions are a great way to claim back much needed cash at the end of financial year. There are many expenses that you are able to claim in your tax return, the top 7 tax reductions for tradies are explained below:
As a tradie chances are your van or ute is your main method of transportation for taking you from job to job. As long as you can prove that you are using your vehicle for business purposes then you are able to claim back the purchase cost and any ongoing operating costs associated with the vehicle.
There are two different ways in which you can track your mileage in order to claim back the cost of running your vehicle for business purposes: the logbook method and the cents per kilometer method. If you choose to use the log book method you will need to prove your odometer readings for a time period of at least 12 consecutive weeks. By tracking the mileage you can claim the percentage of vehicle expenses allocated to business use, including running costs and depreciation. The cents per kilometre method allows you to claim $0.66 per kilometre on up to 5000 kilometres of business travel.
You can claim GST credits for the tools and equipment that you purchase to help you run your business. Items that cost up to $300 can be claimed as a tax deduction immediately. For items that cost over $300 you are able to claim a deduction on the items decline in value.
If your profession requires you to wear specialist protective clothing such as steel capped boots, high-vis jackets, safety glasses and helmets can be claimed as a deduction. It is also possible to claim GST credits for the cleaning of your work clothes. Should the cost of cleaning exceed $150 you will need to provide receipts. For cleaning specialist work clothing on a regular basis you can claim a deduction of $1 for an entire load of work clothing; or $0.50 when the load is partially work wear.
If you’re undertaking any training courses or studying for any qualifications that relate to your trade, you are able to claim back the cost. You must be undertaking said qualification or training course to improve or maintain your skills in your profession only in order for them to be tax deductible.
You’re eligible to claim back the cost of work related phone and internet expenses. For claims more than $50 you need to work out the percentage that is used for work time only over a 4 week period, this can then be applied to the full income year. You will need to prove this with records in the form of bills, electronic summaries or diary entries.
You can claim expenses associated with travelling for work purposes, such as accommodation, meals and transportation costs i.e. taxi fares. These costs are deductible as long as you have proof of purchase in the form of receipts.
The cost of union fees or subscriptions to professional associations are claimable in your annual tax return. Use your statement of fees or subscriptions paid as proof of your membership when submitting your return.
Everyone has tax obligations and must part with a percentage of their income at the end of every year. Business owners have additional tax burdens based on their business process and profit. It’s important that they conduct a break-even analysis and examine expenses and income carefully to determine how much they need to pay every year.
Before you look at possible tax deduction options, you need to know whether your business is legally considered a small business. According to the government, businesses that have an annual turnover of $2 million or less are considered small. All of your businesses, including connected and affiliated ventures, are included in this bracket. This means you can’t split your business in order to remain under the $2 million mark.
As a business owner, you know that you need to spend money to make it. Generally, the biggest portion of your income is funnelled back into your business to pay for essential business expenses and to generate more income. You can get tax deductions for most of the money you cycle back into your business. Many small business owners attempt to abuse this system and claim deductions for frivolous and unneeded expenses. Conversely, many miss opportunities to deduct tax and end up paying more than they need to. Here is a small business tax deductions list that most businesses can lay claim to:
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