What you can claim on your small business tax return      

Struggling to know which business expenses you can claim as a tax deduction for your small business? When it comes to doing your business tax return, it can be tricky to know which deductions you can claim for. As 60 per cent of our branches are owned and managed by small business owners, at BOQ we understand that every little bit helps when it comes to doing your business tax return. To help take the pressure off, the small business banking specialists at BOQ have shared this summary of some examples of expenses you can claim as tax deductions. 

Small business tax deductions available

Small business owners can claim a deduction for most costs incurred in running a business on their annual business tax return – as long as those expenses directly relate to how you earn assessable income. From travel expenses to operating a small business from home, here’s an explanation of some things you can claim on your business tax return.

Business travel expenses

If you’ve travelled to attend a business conference or taken an international business trip to meet with a manufacturer or customer the good news is that you can typically claim those travel expenses as a deduction on your tax return. However, be mindful that all travel expenses you claim must relate to producing your business’ assessable income. Further information on business travel expenses is available on the Australian Taxation Office (ATO) website here.

While travelling for business, small business owners can typically claim the following:

• Transport costs including train, bus, taxi (including Uber and other rideshare services) and airfares
• Accommodation and meal expenses for overnight business travel, and
• Certain motor vehicle expenses.

It is also important to note that special rules apply to each category of these deductions as follows:

1. Private Travel 

If the travel is partly for private purposes and includes private activities, (for example stopping off at an unrelated destination on the route home or extending your trip to have a holiday), you may have to pay fringe benefits tax (FBT) on that expense. FBT relates to benefits provided to employees such as extended travel, items for personal use and gym memberships.

2. Overnight business travel expenses

For overnight business travel, there are particular record keeping requirements:

• Up to five nights– you’ll need to retain documentation such as tax invoices, tickets, boarding passes as evidence of travel expenses; and
• Six or more consecutive nights – you’ll need to retain documentation as mentioned above for all expenses and keep a travel diary of the particulars of all business activities you undertake (including details of what the activities were and the dates, times, locations etc.).

Further information is available on the ATO website.

3. Motor vehicle expenses

As a small business owner, you can claim a tax deduction for certain costs in relation to motor vehicles – cars and other vehicles – used in running your business. The expenses you can claim – and how you calculate them – depend on a number of factors including:

• Do you own or lease the vehicle?
• How the vehicle is used – is it solely a business car or used for private purposes also?
• The structure of your business, and 
• The type of vehicles you use in running your business.

Once established, you can typically claim the following types of deductions, to the extent that the vehicle is being used for business purposes, on your business tax return:

• Vehicle repairs and servicing
• Fuel and oil
• Interest on a business car loan
• Business car leasing payments
• Business vehicle insurance premiums
• Business vehicle registration, and
• Tax depreciation if you own the vehicle outright.

If you use the vehicle for both business and personal purposes, you will need to apportion the costs between business and personal use and only the business portion will be deductible.

Make sure you always keep receipts, tickets and itineraries for all business travel as part of your business tax return.

General operating expenses

Small business owners can generally claim a deduction for expenses that relate to the running of your business.

These can include costs relating to:

• Stationery
• Advertising, marketing and sponsorship
• Website maintenance and other online business expenses
• Public relations and social media
• Waste removal and recycling
• Business loan interest rates
• Business name registration fees, and 
• Small business accounting costs. 

Generally, if you need to spend money on your small business to generate income, it’s likely you can claim a deduction for the expense.

Other expenses you may be able to claim for include:

• Working with children checks
• Books, journals and news subscriptions, and 
• Compulsory uniforms and certain protective clothing including dry cleaning costs.

To claim any general operating expenses relating to your small business you must be able to show that you incurred the expense in order to earn an income for the business. Filling in an expense log with the time, date and reason for purchase is a great way to prove costs were business-related.

Home-based businesses

If you operate a small business (including an online business) from home, you may be able to claim tax deductions for some of the costs relating to the areas of your home (such as a home office or study) that you use for business purposes. These expenses are often categorised as follows:

• Occupancy expenses – including mortgage interest or rent, council rates and home insurance premiums, and
• Running expenses – similar to operating expenses, running costs relate to costs such as gas and electricity, repairs to furniture and furnishings, phone, internet and cleaning expenses.

However, what you can claim will be dependent on your personal circumstances and how you operate your business from home. Further information is available on the ATO website to help home-based small businesses work out what you can claim as a tax deduction.

It’s worth noting that small business owners running a business from home may also have to pay capital gains tax when the home is sold. This is based on the portion of the gain related to the section of the home that was used for business purposes (such as a study).

Important things to remember

Make the most of the Temporary Full Expensing (TFE) incentive

Did you know that under the Federal Government’s TFE incentive you may be entitled to immediately take a tax deduction for the full cost of depreciating assets you have purchased? The TFE incentive applies to eligible assets purchased and installed ready for use between 7.30pm on 6 October 2020 and 30 June 2023. If you purchased your asset prior to 6 October, you may still be entitled to a tax deduction under the older Instant Asset Write Off scheme. 

This can help your cash flow by reducing the amount of tax you pay in the first year you buy and use the asset, rather than taking a tax deduction over the life of the asset, which could be a number of years. Talk to your accountant about your eligibility for this scheme and if this is right for your personal circumstances.

Keep records 

From tax invoices to plane tickets, business credit card statements to business car leasing statements and business bank account fees, you need records to back up any claim you make in your business tax return. Keep your records organised and in a safe place so when the time comes you’re not on the back foot.

Enlist the help of the small business experts

When it comes to something as complex as doing your business tax return, it pays to enlist the help of a good tax accountant to help you claim the right expenses and get the most out of your return. 

Contact us to find out more about how BOQ Business can support your small business

Resources
The Australian Tax Office (ATO) website has useful information to help you with your business tax return including a home office expenses calculator and details about  claiming for motor vehicle expenses. Visit www.ato.gov.au for more information.

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