How to Reduce your tax and accounting fees while paying the correct amount of tax and not a cent more?
Tax Tips Business Tax Tips Business Deduction Checklist
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Accounting Costs Payments to your accountant are deductible if they are related to your business or your income tax affairs.
Payments made by a vendor of a business for accrued long service leave, holiday pay and sick pay due to employees transferring to the purchaser are deductible.
Advertising in the normal course of conducting a business is deductible. This includes advertisements for hiring staff as well as costs associated with public relations and promotion.
Annual leave, long service leave and sick leave payments actually paid to employees are deductible. Provisions are not deductible until paid.
Morning and afternoon teas and light lunches provided to employees on working premises during working hours are deductible and not subject to FBT.
These are normally depreciable to the extent they are used for business purposes.
The costs of appealing or objecting to a tax assessment or tax determination, including Court or Tribunal fees, are deductible.
Costs incurred in auditing annual business accounts and costs of professional advice or support during an ATO audit are deductible.
A deduction is allowed if the debt was previously included in income and it is actually written off during the year in which it is claimed. Check your debtors before June 30 to see what debts are not recoverable and can be written off.
Including FID, debits tax and stamp duty are deductible for business bank accounts.
These are deductible if used for business purposes.
These are deductible to the extent that the property is used to produce assessable income. Where the costs are not deductible they may form part of the cost base of the property as holding costs if the asset is not used for private purposes.
Bonuses, which have not been paid to employees at year-end but accrued for will only be deductible where there is an obligation to pay the bonus and the amount of the bonus, can be determined by reference to a pre-determined formula.
Books, magazines, journals, trade publications and the like are deductible if related to the income earning activity of the business.
Are deductible if the proceeds of the loans are used for income producing purposes. Borrowing expenses include legal expenses, stamp duty, valuation and survey fees and guarantee fees. If over $ 100 the deduction is spread equally over the term of the borrowing up to a maximum of five years. Interest as incurred is also deductible.
Used for business purposes, can be depreciated if the total cost exceeds $ 300, otherwise claim in full in the financial year the expense was incurred.
Used to protect business premises are depreciable.
The cost of ad-hoc lunches provided to employees in an in-house private dining facility may be deductible. (recent rule changes)
Certain business related expenditure is specifically deductible if it is incurred after June 30, 2001. This applies to capital expenditure you incur to:
You are able to claim 20% of these costs in the year in which they are incurred and 20% in each of the next four years.
Subscriptions to business and professional associations are generally deductible so long as the expenditure is reasonably connected to the business or employment of the taxpayer.
Land tax, payroll tax, taxes on bank accounts and similar business taxes are deductible if the expenses relate to business operations. Fringe benefits tax is deductible. GST on business expenses will not be deductible if the business is able to claim it as an input tax credit.
The cost of meals and accommodation incurred on a business trip is deductible if away from home for at least one night. Travel diary substantiation is required if away for more than five nights.
If you require cameras as part of your profession, business or employment, the cost can be depreciated. For example, investigators, engineers, loss assessors, news reporters and photographers may need cameras.
Indexation of capital gains is frozen from 30 September 1999 and averaging is no longer applicable. In lieu of this, individuals and most trusts can claim a 50% discount on capital gains in respect of all assets held for more than 12 months. Complying superannuation funds can claim a 1/3 discount for such gains. No discount is available for companies or other entities.
The cost of obtaining advice in relation to capital gains tax is deductible.
These are deductible if the vehicle is used for business purposes. Leases of non-luxury cars and trucks are also treated as rentals and the lease payments are deductible if the vehicle is used for business purposes.
The cost of entertainment given to the poor, the sick and disadvantaged groups is deductible against business income. An example of this would be sponsoring a party at the children’s hospital.
All cleaning costs of business premises are deductible.
The cost of buying, renting, replacing and maintaining clothing, uniforms and footwear is deductible if it is:
The costs of laundering a uniform will also be deductible provided it falls within one of the categories listed above.
Paid in the normal course of the business is deductible from income. Non-deductible commission on the disposal of assets can be included in the cost of the assets when calculating any gain or loss for CGT purposes.
Are usually deductible in future years. To get a deduction for past tax losses, a company must pass either of the following tests:
Computer Hardware Computer hardware can be depreciated over its effective life.
Software purchases of $ 1,000 or less can be claimed in full by STS taxpayers. Otherwise expenditure incurred in acquiring, developing or commissioning software is depreciated.
All items required by business, such as spare parts, stationery, computer disks, office supplies and for farmers – items such as fencing materials, fertilizers, fuel, etc. are deductible. No allowance is required in respect of any unused items at the end of a financial year. Stocking up with consumable stores just before the end of a financial year can be a good tax planning measure.
The cost of running a seminar (or conference, lecture, meeting or training session) is deductible if the seminar is related to income earning activity.
Expenses (including legal fees and patent attorney’s fees) of retaining or extending copyrights, patents and designs are deductible provided it is for the purpose of producing assessable income. The capital cost of developing or buying a copyright, patent or design, can generally be amortised over the life of the item.
All charges relating to the use of credit cards for business purposes including merchant fees paid by businesses that provide credit card facilities are deductible.
Incurred in the normal running of a business are deductible.
All items of plant and equipment used for business purposes qualify for depreciation. The depreciation rate is based on the effective life of the item. Accelerated rates for large and medium businesses ceased from 21 September 1999 and for small businesses from 30 June 2001.
Are deductible in the year in which they are accrued (provided there is an obligation to pay). If not paid within the year, they must be authorized by a shareholders’ resolution. PAYG instalments should be deducted at the time of payment.
Premiums for income protection are deductible if the benefits are in the form of regular payments. The deduction is allowed to both self-employed taxpayers and employees.
Allowed if the cost of clothing is also deductible.
May be deductible if membership is required for business purposes.
Are deductible if the course is necessary to keep up-to-date or to improve your ability to perform the duties of your existing employment. Expenses incurred in gaining qualifications for promotion within an existing Seminars and short courses run by professional bodies are generally fully deductible. The first $ 250 of expenses relating to courses run by educational institutions, such as schools, colleges and universities cannot be claimed. However, this amount is usually absorbed by undeductible expenses such as travel, meals and parking.
Employment Agreements Costs related to employment agreements are deductible for employers.
Entertainment Expenses Generally considered not to be deductible unless you are in the business of providing
These include costs incurred in combating or rectifying pollution or cleaning up waste arising from an income producing activity. Expenses incurred in such activities are generally deductible for both current and capital expenditure.
For designated employees are deductible.
Free holidays and other gifts offered as part of a sales promotion campaign to the public are deductible.
Gifts of $ 2 or more to specified charities are deductible.
Minor gifts to employees are tax deductible and if they are of a value of less than $100 each and provided to employees on an infrequent basis, will also be exempt from FBT.
Safety glasses and goggles required for protective purposes are deductible.
If working dogs or guard dogs are used in non-primary production business, the dogs would fall under the definition of plant and would normally be depreciated. Small business can claim the costs incurred up to 30 June 2001 in full if less than
Hire of plant, equipment and non-luxury motor vehicles used in earning income are deductible.
Items acquired under hire purchase agreements are treated for depreciation purposes as though owned by the hirer. Depreciation is claimed by the business using the equipment. The interest portion of the hiring charge is also deductible.
Where a business is conducted from home, a deduction is generally available on heating, lighting, cleaning, phone and depreciation of equipment used in If a specific area is set aside solely for use by the business (more than merely a home office), a deduction may also be available for a proportion of rates, maintenance, insurance and mortgage interest, or rent, but a claim for these deductions may affect the main residence exemption for CGT purposes.
Can be claimed if the policy provides an income benefit if off wok due to an accident or sickness.
Can be claimed on a dollar for dollar basis in the Business Activity Statement (BAS) by GST registered businesses that hold tax invoices for all acquisition of goods or services of $ 50 or more. Input tax credits on acquisitions under $ 50 can be claimed even though a tax invoice is not held.
Premiums paid for business insurances and income protection insurance are generally deductible.
Interest is deductible where the loan is used to finance the day-to-day operations of a business or to purchase income-producing assets (note that the interest may continue to be deductible even after the business operations have ceased).
The general interest payable to the ATO arising from the late lodgement of tax returns, late payment penalties or underpayments is deductible in the year it is paid.
The costs of washing, drying and ironing uniforms, which qualify for tax deductions are, tax deductible. Claims up to $ 150 within the general $ 300 concession, may be claimed without substantiation. Lease Payments Expenses of laundering work clothing up to $ 150 need not be substantiated, but this figure is included in the $ 300 general substantiation threshold. Deductible costs can be calculated on the basis of $ 1 per washing machine load or 50 cents per load when work clothes are washed with other clothes. Lease payments, including stamp duty, on equipment (apart from cars in excess of the luxury car limit) used for business purposes, are fully deductible. The final residual payment is not deductible as it classed as the purchase of an asset. Depreciation can be claimed on this amount over the remaining life of the item.
Expenses incurred in preparing, registering or stamping a lease or assigning or surrendering it, are deductible if the lease is for business purposes.
Incurred in the everyday running of a business are deductible. This may include debt recovery expenses, contract preparation, lease preparation, mortgage documents preparation, etc. Legal expenses incurred in purchasing capital assets are not deductible but should be included in the cost base of assets for CGT purposes.
Textbooks and the cost of a professional library are depreciable. Refer to the item Plant and Equipment for further explanations.
The cost of an initial licence to establish a business is generally not deductible unless it is the first of annual licence fees. Ongoing renewals of licences required to operate the businesses are generally deductible.
Expenditure incurred in business premises for lighting, heating and powering of computers and office equipment is deductible. Management fees or retainers pad to an investment adviser where the investments are made to produce assessable income are deductible.
Meal expenses paid by an employee receiving an allowance under an award are deductible.
When medical expenses exceed $ 1,500 after Medicare and health insurance refunds, a 20% rebate is allowed on the excess. Medical expenses does not include all medical expenses. You can claim expenses relating to an illness or operation paid to legally qualified doctors, nurses or chemists and private and public hospitals. However most expenses relating to Car and mobile phones provided to employees are depreciable and will not be subject to FBT provided they are primarily for work-related use.
Deductions can be claimed for depreciation (up to the luxury car limit of $ 57,180 GST inc) and registration, petrol, repairs, maintenance, tyres and parking fees, where the vehicle is being used to produce assessable income, subject to the substantiation method being used. . There are 4 different ways to claim a car.
If you claim your car expenses using the logbook method you need to keep written evidence of your car expenses. In addition to this you also need to maintain a logbook. The logbook must be kept for a 12-week period and it must record each business journey during that period. For each business trip the logbook must include:
The logbook will remain valid for 5 years, however you may be required to keep a new logbook where:
If you travelled more than 5,000 business kilometres you can claim 1/3 of your actual car expenses. If you use this method you are not required to keep a logbook, but you still must keep written evidence of your car expenses.
If you travelled more than 5,000 business kilometres you can claim 12% of
If you use the cents per kilometre method you are not required to maintain records to substantiate your car expenses. The amount you are able to claim is based on the number of business kilometres travelled (up to a maximum of 5,000 kms) multiplied by a statutory rate based on the engine size of your vehicle. The rates for 2008/09 as follows: Engine Size Rate (c/km)
Trade newspapers are normally deductible so long as they are reasonably related to the business or employment of the taxpayer. A partial deduction has been allowed for general newspapers where a specific link is established with the employment. Politicians and journalists have been allowed a deduction for newspapers, except for the ones they would have bought in any event. Overtime Allowances Overtime allowances paid to employees are deductible. Such allowances are included in the employee’s assessable income. Overtime meal allowances paid under an award, up to a maximum yearly acceptable amount per meal, can also be claimed by the employee without substantiation.
Parking expenses incurred when on business trips are deductible. On-premises car parking provided to employees of businesses with annual turnover of less than $ 10 million is FBT exempt. Any other car parking provided to employees is subject to FBT eg where there is a commercial car park within a one kilometre radius that charges more than a certain threshold per day.
Payroll tax paid in relation to employees is fully deductible.
Small business taxpayers who have elected to enter the STS can claim expenditure on plant items costing less than $ 1,000 in full. Other plant items can be transferred to a pool and, where the effective life is less than 25 years, depreciation at the rate of 30% is claimed. Depreciation at half that rate can be claimed for items acquired during the year. Items in the long life pool (effective life of 25 years or more) can be depreciated at 5% diminishing value.
Accelerated depreciation rates can still be claimed by medium and large businesses on plant acquired before 21 September 1999, and by small businesses in respect of plant acquired before 1 July 2001. Non-STS taxpayers can use a small items pool for items costing less than $ 1,000. This pool is depreciated at 18.75% for first year acquisitions, and at 35% on a diminishing value basis thereafter. Other assets are depreciable over their effective life.
Detailed below is a list of concessions available to you if you are engaged in a primary production business;
The Commissioner has the power to make private rulings in relation to particular arrangements that began on or after 1 July 1992. Once made a private ruling is binding on the Commissioner if it is favourable to the taxpayer. Note that a private ruling can only be sought on how a tax law applies to an arrangement it cannot be sought on a question of fact. An application for a private ruling must be made in a form approved by the Commissioner (a standard form is available on the ATO website at www.ato.gov.au/content.asp?doc=/content/forms/form_privateruling.htm) and should set out all the relevant details including details of the parties, the material facts, arguments and authorities supporting the suggested tax consequences.
These fees are deductible if membership is related to the earning of assessable income.
The cost of promoting a business or its products is normally deductible. Where a promotion or exhibition is open to the public, the cost of
Council rates and water rates on income producing property, including rental houses, are deductible. An employer may deduct the cost of moving a new or existing employee to a new location.
Rent payments for business premises are deductible. Outgoings under the lease for rates, taxes and other costs are also deductible. The rent is deductible when it is due, even if it remains unpaid.
Repairs to premises, plant and equipment are fully deductible when they are incurred. Repairs are meant to bring the item back to its original condition. If there is a significant
Concessional tax deductions are allowed for eligible research and development activities. Strict criteria are set down in the Income Tax Assessment Act and by the Industry Research and Development Board.
Paid for the use of any property or right in a business, are deductible.
Are generally deductible as accrued. Annual leave, long service leave and sick leave are deductible when paid.
You can claim a deduction for accident and sickness premiums when the policy provides you with an income benefit in the event of disablement.
If this is provided for the purpose of advertising a business or its products, the cost is deductible. The deduction may be reduced by the value of any hospitality area allocated to the sponsor.
If paid in respect of day-to-day transactions such as stamp duty on car registrations and insurance premiums, the amount is deductible. Stamp duty on capital purchases, such as property or shares is included in the cost base of the asset for CGT purposes.
Taxes and charges paid to
The cost of stationery where acquired in the business is fully deductible.
Rent or fees paid for storage of goods used in producing assessable income are deductible.
If required and used in the business, would be deductible.
Payments for contactors for work associated with carrying on a business are deductible. Note sub-contractors will be required to issue you with a GST invoice for their services in order for you to obtain an input tax credit. Additionally, if no ABN is provided you are required to withhold tax from payments to them at the rate of 48.5%.
The cost of sunglasses, sun hats and sunscreen has generally been held not to be deductible. However, a recent Court case determined that they will be tax deductible when exposure to the sun is a natural incidence of one’s work. Special anti-glare glasses have been allowed for long distance truck drivers and
An employer may deduct superannuation contributions made on behalf of employees. Superannuation - Employees If an employee receives any form of employer superannuation support (including award superannuation), he or she cannot claim any deduction for personal superannuation contributions, unless their employment income is less than 10% of total assessable income. However, if the employee’s assessable income and reportable fringe benefits for the year amount is less than $ 31,000, he or she may be entitled to the co-contribution from the government. Superannuation - C0-Contribution To come.
Self-employed persons may claim deductions for personal contributions up to $50,000 per financial year for those aged over 50 years of age and for those aged less than 50 years of age a maximum tax deduction of $25,000 is available. Superannuation Guarantee Superannuation guarantee payments are deductible in the year in which they are paid.
A rebate is available for superannuation contribution to a complying superannuation fund for a low income or non-working spouse. The rebate is 18% of contributions up to a maximum of $ 3,000 contribution (the maximum rebate is $ 540). The rebate reduces once your spouse’s income exceeds $ 10,800 and disappears after the spouse income reaches $ 13,800.
The cost of preparing tax returns and dealing with objections, appeals or audits is deductible for either a business or an individual. Tax planning advice from an accountant, barrister or solicitor is also deductible. Tax advice concerning land tax, payroll tax and other business taxes are also deductible. The costs of tax-related publications are also tax deductible.
The cost of travelling to a tax advisor for the preparation of a tax return or other advice is tax-related expenditure and therefore deductible.
Related to business travel are deductible. The cost of a taxi trip between two places of work is deductible. Taxi fares paid by an employer to enable employees to travel between home and work are deductible and are not subject to FBT.
These are depreciable over their effective life. STS taxpayers can claim the cost in full if under $ 1,000. Refer to explanations under Plant an Equipment.
The cost of tea, coffee and light lunches provided in workplaces during a working day by employers is generally deductible and not subject to FBT.
The rent and cost of calls on a business phone are deductible. A self-employed person working from home with only one phone must apportion the use between private and business. An employee may also deduct the cost of business calls made from home. A proportion of the telephone rent may also be deductible if the employee is “on call” or needs to make regular business calls.
These are deductible as motor vehicle expenses when travelling on business.
Tools and equipment used in gaining assessable income by small businesses acquired before 1 July 2001 and costing less than $ 300 were immediately deductible. After that date they must be depreciated over their effective life of five years or pooled by larger businesses. STS taxpayers can obtain an immediate deduction for all items costing less than $ 1,000.
These are generally considered to be deductible when they relate to the production of assessable income.
The cost of acquiring trading stock is deductible. The cost of moving trading stock from one place to another is also deductible. You can choose to value each item of trading stock on hand at the end of the year at either it's cost, its market selling value or its replacement price. You can choose different methods for different items.
Travelling costs for business purposes are deductible. Where a trip is partly business and partly pleasure, the expenses should be apportioned. Expenses, which qualify, are generally air travel, motor vehicle costs, taxi, hotels, meals and incidentals. For a trip of more than five nights a travel diary is required. This must include the time, place, and nature of each business activity undertaken and the duration of that activity.
Taxation Rulings set out amounts considered reasonable for domestic and overseas travel allowances, overtime meal allowances and travel expenses for long distance truck drivers for 2008/09. The substantiation provisions do not apply where the claims made do not exceed the allowances set out in the rulings.
A travel diary is not required for domestic or overseas trips which involve fewer than five nights absence. However, written evidence of expenses is essential and the travel must be for business. If an allowance is received and the claim is not higher than the allowance or the prescribed limits, substantiation for meals and accommodation would not be required.
Travelling expenses incurred in travelling between home and the workplace are generally not deductible. However, such expenses can be claimed if the home is used as a principal office or a point at which work is obtained. These expenses can also be claimed if it is necessary to visit customers on the way to work or where it is necessary to transport bulky tools.
The cost of corporate uniforms is deductible if wearing them is compulsory. Non-compulsory uniforms may be deductible if they have specific corporate logos or other identifiers and are registered with the Register of Approved Occupational Clothing.
Are deductible. Subscriptions paid to the Industrial Registrar in lieu of union dues are also deductible.
In an in-house recreational facility are depreciable.
The cost of setting up a website that establishes, replaces or enlarges the business may be treated as capital and therefore not deductible as an operating expense. However concessions may be available under the capital allowance rules (e.g. business related capital cost 5 year write-off). It may be worthwhile apportioning your costs between those related to hardware and software to help maximize your deductions.
Premiums paid for Workers’ Compensation, Workcare or Workcover in order to insure workers against accidents are deductible.
Accountants Disclaimer
Our procedures use taxation & accounting expertise to collect, classify and summarise the taxation & financial information, which the client provided to us. We have subsequently complied this report based on that information. Our procedures do not include verification or validation procedures. No audit has been performed and, accordingly, no assurance is expressed. The issues discussed herein are general comments only, and do not constitute advice per se. This report is intended as a useful guide for our client and for their private information. Therefore, it should be regarded as confidential and may not be available to any other person without our prior approval. Furthermore, tax laws are complex, and as a result, prior to pursuing any of the discussed strategies, consultation with our office is essential. To the extent permitted by law, we do not accept liability for any loss or damage directly suffered by anyone other than our clients, arising from any negligence on our part. The Business Deduction Checklist Report was prepared exclusively for the benefit of the client. We do not accept responsibility to any other person for the contents of this report.
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