With the ever-evolving business landscape, the pressure is on small business owners and sole traders to tighten their accounting habits every year to ensure not a dollar spent is overlooked. In Part 1, we looked at a few tax deductions that business owners often overlook. Let’s take a look at a few more tax deductions you may have failed to consider when preparing your business activity statement.
While it is easy to keep track of larger, direct charitable donations, it’s the little things that can be easily overlooked. Your donation must be $2 or more, and you need to ensure it is made out to a deductible gift recipient charity – that way you can claim the full donated amount on your tax return. Remember to keep proof by way of receipts or bank statements.
You can deduct a ‘gift’, provided it truly is a voluntary transfer of money or property where you receive no material benefit or advantage. However, there are some things you can’t claim, such as raffle or art union tickets, items such as chocolates and pens, and the cost of attending fundraising dinners.
Home Office Deductions
While there are a growing number of small businesses operating from home, many still fail to claim a tax deduction for any business use of their home. Many fear the deduction process is too complex, or that it could lead to other tax implications on their property moving forward. These reasons should not deter you from claiming what you are entitled to come tax time. The best way to ensure transparency is to simply obtain the right tax advice early on in the game to see exactly what portion of home use you can deduct as use for business purposes. Speak to your accountant or bookkeeper about the process for claiming home office costs.
Many new businesses, especially in the heat and panic of getting their startup off the ground, forget to accurately track all expenses incurred beforehand. So as soon as you begin making sales, ensure you don’t overlook those startup expenses as deductions. The most important thing is to maintain accurate and detailed records and receipts from the outset. Accounting software, such as QuickBooks Online, can help you stay on top of expenses and streamline your reporting.
Traditionally, it has been easy to deduct desktop software expenses, as it is simply a full deduction in the financial year the software was purchased and installed. However, with the proliferation of cloud-based business tools, marketing platforms, automation systems and tracking tools, things can get a little tricky. If you are paying for cloud-based software, you can deduct the monthly charges that apply within the relevant financial year. There is no dollar limit provided you have proof of your ongoing payment plan.
Remember to consult a professional tax advisor, accountant or bookkeeper if you have tax questions specifically related to your industry or your business circumstances. Every business is different, so the deductions you can claim will be different as well.