Small Business Tax Tips Looking for tax tips that could end up saving you a bun ..
Looking for tax tips that could end up saving you a bundle? Here are some basic tax tips on deductions for small businesses that you can get started. Being self-employed or owner of a small business, it can be difficult to submit your annual tax return. Though you can and should use the services of tax professionals, it is always good to have a basic knowledge of what you can and cannot claim in your tax return. Personal tax returns can be complicated enough; while submitting a company or business tax return can be downright overwhelming. One way to get your 2017 tax return off to a good start is to visit a tax consultant, someone who can both explain the latest ATO changes and explain ways to help you prepare for them. In the meantime, however, here are some basics of tax tips on deductions for small businesses that you can get started on right away.
Tax Tip #1: Get Organised
Good tax planning begins with getting organised—particularly when it comes to keeping good records about the things you spend money on for your business. That means treating receipts like cash, not trash. Think about it: each $100 business expense receipt could be worth up to $50 when it comes time to filing your taxes, depending on your tax bracket.
To keep track of those expenses, Taxgain recommends carrying a receipt envelope with you in your purse, car, briefcase, backpack, or wherever works best for you.
Then, as you make purchases for your business—whether it relates to buying paper for a copier, picking up a lunch tab for a customer, or buying plane fare to attend a trade show—you can simply place the receipt into the envelope. As the envelope fills up, you should then transfer the receipts to your accounting files or to the many software or online programs, such as Shoeboxed.com, that are now available to help you track your expenses.
Tax Tip #2: Home Office
Many small business owners are afraid to claim “home office” deductions. Here are some pointers when it comes to claiming tax deductions for a home office.
Make sure that your office is distinct from your living area. Whether it is a room of its own or a part of a larger space, there should be a clear line between your workspace and the rest of the home. Don’t use your office as a spare bedroom or a playroom for the kids.
If you only have one computer, claiming it as the office computer will be difficult. The ATO may not believe that it is not used for personal use as well. The burden of proof will be up to you, so either dedicate a computer solely to work, or omit the computer area from your office space.
Figuring out the percentage of home expenses that is deductible for your business is simple. Measure your work area and divide by the square footage of your home. That percentage is the fraction of rent, mortgage, utilities, taxes, and maintenance you can claim.
Tax Tip #3: Technology Purchases
Small businesses need to be up-to-date on their technology, and the ATO does not stop this. Equipment expenses such as computers, printers, and even company vehicles are tax-deductible, up to a certain amount.
So don’t be afraid to get the technology you need to perform necessary business tasks. If you’re going to purchase a work vehicle, make sure it is only used for work.
Subscriptions to business-related websites and magazines are fully deductible.
Tax Tip #4: Travel Costs
Owning a small businesses that needs to travel is something many people dream of, and small business owners often get to realise that dream. Since travel can be necessary for business success and expansion, many of the expenses are completely tax deductible. Our tax tip on travel is to write off expenses like airfare, hotel fees, car rental and mileage, and travel expenses like laundry costs.
Remember these points when deducting business travel expenses:
Feel free to take your family with you, but only the costs for you, and only those that are business-related, can be deducted.
Conference fees are deductible as long as the conference is directly useful for your business. If it’s a conference related to your industry or will help you run your business more smoothly, then it probably qualifies. If the purpose for going is to earn money on the side, then it’s not as impactful to your business, and is not as likely to qualify. And of course, fan conventions and other entertainment-based events do not count, even if there are lectures.
As always with finances, especially taxes, it’s important to keep your receipts and details about the reason for purchases. While doing this for every purchase may seem over-the-top, it’s easy once you get into the habit of it. It will also save you a lot of grief if you get audited, and it will help you keep peace of mind that your finances aren’t going to get your business in trouble.
The last thing you need is a knock on door from the ATO. The more organised your finances are, the more you can focus on making your business successful. The cost of running and maintaining a business is high, but many of those costs can be reduced by filing your taxes knowledgeably. Do your research, take the time to submit your business tax return correctly.
As always tax time brings with it a sense of urgency and pressure, and mistakes inevitably follow. Tax deductions go unclaimed, paper trails go awry and costly surprises can result. Taxgain can help with both individual tax returns and company tax returns.
Contact us today to find out more.