What small business tax deductions & concessions can I use?

Are you eligible for some small business tax deductions & concessions?

Do you want to improve your small business’s tax position and maximise your savings? Well, you’re in luck!

There are several small business tax deductions, concessions, tips and tricks that you can take advantage of to reduce your income tax liability and keep more money in your pocket. Keep reading to find out how you can access these valuable opportunities and discover the tools you need to navigate the world of small business tax deductions. 

Income tax concessions

Let’s start with income tax concessions. As a small business owner, you can benefit from various concessions that can make a significant difference to your tax liability. Concessions for small businesses will often result in accelerated access to small business tax deductions. For instance, you can deduct the full amount of prepaid expenses in the year they are incurred, regardless of whether the benefit or service extends beyond the current year. This allows you to bring forward your deductions and enjoy immediate tax savings in the current tax year.

Depreciation

Depreciation is another area where you can save big. Under simplified depreciation rules, you can deduct the cost of depreciating assets. Assets that cost less than the instant asset write-off threshold can be fully written off in the year they are first used. This means you can quickly recover the cost of your business assets and lower your taxable income. 

If you deal with trading stock, you’ll be happy to know that small businesses can utilise a simplified trading stock regime. This eliminates the need to individually value each item or account for changes in value if the estimate of value change is less than $5,000 for the income year. It streamlines your record-keeping and makes managing your stock easier. 

For businesses with total revenue of $5 million or less, there’s the Small Business Income Tax Offset. This offset can reduce the amount of income tax owed by 16% of net small business income, with a maximum limit of $1,000. It’s a valuable concession that can help lower your tax burden. 

Are tax payments and obligations causing you stress? Then it’s time to do some tax planning!

Time limit for ATO changes

When it comes to assessments, the time limit for tax authorities to make changes to your tax assessment has been extended to 4 years for taxpayers with complex tax affairs. This extension provides you with more certainty and stability, giving you peace of mind knowing that the tax authorities cannot make unexpected changes to your tax situation beyond the 4-year period. 

Business restructure

During a change of legal structure, you can take advantage of restructure roll-over relief. This relief exempts you from paying capital gains tax on gains or losses associated with certain assets transferred during the legal structure change, such as CGT assets, trading stock, depreciable assets, and revenue assets. This can be a significant benefit when restructuring your business while maintaining ownership of the assets. 

Other concessions

But that’s not all! Small businesses can also benefit from concessions when it comes to capital gains tax (CGT), PAYG instalments, fringe benefits tax (FBT), GST, and payroll tax. These concessions offer additional avenues for reducing your tax liabilities and optimising your financial position. 

Deductions

In addition to the concessions, there are various small business deductions that you can claim to further enhance your tax savings. Here are some common small business tax deductions in Australia:

Operating Expenses

Deductible expenses related to the day-to-day operations of the business can include:

• Rent or lease payments for business premises
• Utilities such as electricity, water, and internet
• Office supplies and stationery
• Advertising and marketing costs
• Insurance premiums for business-related coverage
• Bank fees and charges
• Repairs and maintenance expenses for business assets

Employee-related Expenses

This category includes costs associated with employees, such as:

• Wages, salaries, and bonuses
• Employer contributions to superannuation (pension) funds
• Payroll taxes and workers’ compensation insurance
• Training and professional development expenses for employees

Depreciation and Capital Expenses

Deductions can be claimed for the decline in value of assets used in the business over time, including:

• Plant and equipment, such as machinery, computers, and tools
• Vehicles used for business purposes
• Office furniture and fittings
• Capital improvements made to business premises

Home-based Business Expenses

If you operate your business from your home, you may be able to claim deductions for:

• A portion of your home office expenses, including rent, mortgage interest, or utilities
• Internet and phone expenses that relate to business use
• Depreciation of office equipment and furniture used at home

Motor Vehicle Expenses

If you use a vehicle for business purposes, you can claim deductions for:

• Fuel and maintenance costs for business-related travel
• Depreciation or lease payments for the vehicle
• Registration and insurance expenses

Professional Services and Business Fees

Fees paid for professional services can be deductible, such as:

• Accounting and bookkeeping services
• Legal fees for business-related matters
• Business consultancy or advisory fees
• Membership fees for professional organisations relevant to the business

It’s important to maintain accurate records and documentation for all expenses claimed as deductions. Additionally, specific rules and limitations may apply to different deductions, so it’s recommended to seek advice from a qualified tax professional to ensure compliance with the Australian Taxation Office (ATO) regulations.

Would you like to learn more about what concessions and deductions your business may be eligible for?

Has looking at your business’s tax position raised questions for you? A tax planning meeting with Pretium Solutions can get your business on the right track.

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Disclaimer: Taxation Laws, Regulations and ATO Rulings on Interpretations can change. To make sure you are making decisions based upon the current rules that apply, always consult with your Registered Tax Agent before making decisions. The information contained in the above article is general advice only and cannot be relied upon as a substitute for professional advice. You should seek specific advice relevant to your own circumstances from appropriately qualified persons.​