As the end of another tax year approaches, the ATO is reminding businesses that it’s time to:
- see if there are tax-deductible items your business needs before 30 June;
- check if there are any concessions your business can access before 30 June;
- think about your recordkeeping habits this past year – should anything be done differently in future?
If your business has employees, the Single Touch Payroll (STP) information for 2021–2022 must be finalised by 14 July. Remember to let your employees know when the information’s finalised, so they can lodge their income tax returns.
Increasing your business’s tax deductions will lead to a lower tax bill. For example, you may be able to bring forward expenditure from the next tax year to the current tax year, or 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, you 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 are another good way to increase your deductions. Don’t forget to keep donation receipts!
The ATO has three golden rules for a valid business deduction:
- The expense must have been for business, not private, use.
- If the expense is for a mix of business and private use, only the business portion can be claimed as a deduction.
- You must have records to prove your business incurred the expense.
For example, if you buy a laptop and only use it for your business, you can claim a deduction for the full purchase price. However, if the laptop is used 50% of the time for your business and 50% of the time for private use, only 50% of the purchase price can be claimed as a business deduction.
Records explain the tax and super-related transactions conducted by a business. Businesses are legally required to keep records of all transactions relating to their tax and superannuation affairs as they start, run, sell, change or close the business, specifically:
- any documents related to the business’s income and expenses;
- any documents containing details of any election, choice, estimate, determination or calculation made for the business’s tax and super affairs, including how any estimate, determination or calculation was made.
TIP: Make sure you understand what records are needed for your business, and aim to make accurate and complete recordkeeping practices a part of your daily business activities. Talk to us about what records your business needs to keep, for how long, and what we can do to help!