As the end of another tax year approaches, the ATO has reminded businesses that it is time to:

• see if there are tax-deductible items the business needs before 30 June;
• check if there are any concessions the business can access before 30 June – for example, the small business restructure rollover CGT concession or the increased small business income tax offset (now 16%) for sole traders (capped at $1,000);
• think about record keeping habits this past year – would anything be done differently?

If your business has employees, the Single Touch Payroll information for 2021-22 must be finalised by 14 July.

Remember that your tax adviser can help you with your business’ tax.

Deductions

Increasing tax deductions will lead to a lower tax bill. For example, your business may be able to deduct the full cost of a depreciating asset under the temporary full expensing rules. An immediate deduction is also available for start-up costs and certain prepaid expenses.

If your business is in an industry that requires physical contact with customers, such as healthcare, retail or hospitality, it can claim deductions for expenses related to COVID-19 safety. This includes hand sanitiser, sneeze or cough guards, other personal protective equipment and cleaning supplies.

Charitable donations (including, in some circumstances, donating trading stock) are a good way to increase deductions. Check the deductibility status of charities and don’t forget to ask for a receipt.

The ATO’s golden rules

The ATO has 3 golden rules for a valid business deduction.

1. The expense must have been for business, not private, use.
2. If the expense is for a mix of business and private use, only claim the business portion can be claimed as a deduction.
3. The business must have records to prove it.
   

For example, if your business buys a laptop and only uses it for its business, it can claim a deduction for the full purchase price. However, if the laptop is used 50% of the time for the business and 50% of the time for private use, only 50% of the purchase price can be claimed as a deduction.

Need help with your business deductions?To make sure that you understand what records are needed for your business and make accurate and complete record-keeping practices a part of your daily business activities, talk to us about what records your business needs to keep and for how long.