ATO’s Top 3 most frequent small business deduction queries

Questions from small business taxpayers have made up a significant proportion of the enquiries the ATO fields in its day-to-day business. The ATO has had the opportunity to identify and share some of the top three tax deduction questions that applied to small business taxpayers.

Aside from specific deductions, the ATO also reminds small businesses that they can claim a deduction for most costs incurred in running the business, and this includes, for example, staff wages, marketing, and business finance costs. “Remember – you can’t claim private expenses,” the ATO says, “and make sure you keep records to support your claims.”

The top three deduction questions, and the ATO’s answers, are:
What business travel expenses can I claim? 
"If you or your employees travel for business, you can claim:

• airfares, train, bus or taxi fares
• accommodation costs and meal expenses for overnight business travel – fringe benefits tax may apply for some employee travel expenses.”

Can I deduct the cost of some assets straight away?
“If you use the simplified depreciation rules, you claim a deduction:

• immediately – for the business portion of depreciating assets costing less than $20,000 each
• over time – for most other assets, combining costs into a small business pool and claiming a set percentage each year
• immediately – if the balance of your pool is less than $20,000 at the end of the income year.”

What can I claim if I have a home-based business?
“If you run your business at your home, or your business is based from home, you can claim the business portion of some expenses, including mortgage interest and electricity"

“If you sell your home, you may have to pay capital gains tax (CGT) on the business portion and declare it in your tax return.”

Tax practitioners with small business clients may want to refresh their knowledge covering these particular areas of taxation. The following links to the ATO website may help:

• Business travel expenses
• Simplified depreciation for small business
• Home-based business
• Deductions
• Concessions for small business entitites (also available in Arabic, Chinese, Korean and Vietnamese)

Source: Tax & Super Australia