Tax time / End of Financial Year (EOFY) is just around the corner, so it’s time to get your expenses in order. But with so many transactions involved in trade businesses, it’s easy to forget which ones you can claim in your return. Here are the top 10.
1. Vehicle expenses
Vehicle purchases and costs associated with operating your vehicle are claimable when you can prove they are for business purposes (and you don’t receive a car allowance). Under the logbook method, you need to show odometer readings for a period of at least 12 continuous weeks. Mileage tracking allows you to claim the percentage of vehicle expenses apportioned to business use, including running costs and depreciation.
Under the cents per kilometre method, you can claim $0.66 per kilometre on up to 5000 kilometres of business travel. Either way, you need to track your mileage, which you can do easily and automatically with software like QuickBooks Self-Employed.
2. Travel expenses
Travel expenses, such as meals, accommodation, flights or taxi fares, are deductible if you can show receipts and have not been reimbursed or given a car allowance. If your vehicle is under a novated lease, your employer is eligible to claim vehicle expenses.
3. Tools, equipment and other assets
GST credits are offered for the cost of tools, equipment or assets purchased to operate your business. For an item that costs up to $300, an immediate deduction can be claimed. Where the cost exceeds $300, you can claim a deduction on the item’s decline in value.
4. Tools and equipment repairs
Expenses involved in repairing or insuring your tools and equipment can be claimed too, as well as any interest charged on money borrowed to purchase the items. If you use these items for both work and personal use, you’ll need to show a diary that specifies how it’s used, so the deduction can be apportioned correctly.
5. Occupation-specific and protective clothing
If you buy certain protective clothing or items for your work, such as hard hats, sunglasses or steel-capped boots, you can claim them as a deduction. This also applies to occupation-specific clothing needed to distinguish you from the public, like a uniform.
6. Laundry and dry cleaning
You can even claim GST credits on costs associated with cleaning your work clothes. If this expense exceeds $150 and other work-related expenses total more than $300, you need to provide receipts. Otherwise, a reasonable basis for calculating your laundry or dry cleaning deduction is $1 where the whole load is work clothes, or $0.50 where it is partially work clothes.
7. Training courses, licences and certifications
Any training courses, licences or certifications you undertake to maintain or improve your skills, or that certify you to perform a task for work, are tax deductible. Courses that are not generally related to your work or new employment are not eligible.
8. Union and association fees
You can claim any union fees or subscriptions to trade, business or professional associations. Most unions provide members with a statement of fees or subscriptions paid, which you can use to prove your association in your return.
9. Mobile and internet
When you pay for work-related phone or internet expenses, include the cost in your return. If you plan to claim more than $50, you will need to determine the percentage related to work use over a four-week representative period, which can then be applied to the full income year. Records can be kept in the form of diary entries, electronic records, or bills.
10. Cost of managing tax
Costs related to lodging your tax return are deductible as well. This includes your accounting software, tax agent fees, any travel to tax advisors, appeals to court in relation to tax affairs or interest charged by the ATO. These costs are considered to be incurred in the year they are paid.
Every business is different, as is every tax return. But to maximise your deductions and save this financial year, it’s important you understand what you’re eligible for. If you’re still unsure, speak to an expert advisor.
To read more articles related to tax if you’re self-employed, visit here.