Top tax tips for small business from the ATO

When the ATO works with small business we are often asked questions about what can be claimed, what concessions are available and what’s new for small business – so I thought it would be useful to provide some answers here.

We know running a business can be busy and at times stressful, especially at tax time. That’s why the ATO wants to make it as easy as possible for you to understand and meet your tax obligations.

What can I claim for my business at tax time?

When considering deductions, keep in mind you can claim most expenses you incur in running your business. Although different businesses will have different costs associated with them, there are common expenses you should check you’ve included.

Most businesses have everyday operating expenses including the costs of:

• stationery
• trading stock
• advertising
• bank fees
• insurance
• wages

There are also operating expenses associated when your business is online, which more and more businesses are doing. These costs include website expenses such as registration, web hosting, and licensing fees.

Don’t forget to take advantage of the $20,000 instant asset write-off if you’ve bought or intend to buy business assets before 1 July. To write them off in your 2018 tax return, make sure you bought and installed them in the income year and use simpler depreciation rules. You may have heard that the government recently proposed to extend the $20,000 instant asset write-off to 30 June 2019; however, this change is not yet law.

You can also claim business premises costs such as electricity, phone, water, rental or lease.  Alternatively, if you run your business at your home or your business is based from home, you can claim home-based business costs. However, you can only claim the business portion of occupancy expenses and running expenses, like mortgage and electricity. To help you work out the business portion amount you can claim as a deduction, use our home office expenses calculator.

Do you or your employees travel for business? Whether it’s near or far, you can claim business travel expenses such as bus, plane, rideshare or taxi trips– remember to keep that receipt.  If you have a car for your business, you can claim motor vehicle expenses associated with running and maintaining the car such as petrol, rego and insurance. You can also claim the car itself, but usually that’s over a period of time because it’s a capital asset.

If you’re an employer, you can claim costs of employing people such as salaries and wages you pay to your workers and super contributions you make on behalf of them.

For all expenses, use the 3 golden rules to help you determine if you can claim a deduction:

1. The money must have been spent for your business – not a private expense. This is a simple one; you can’t claim private expenses such as personal groceries and clothing for your family.
2. If it is for a mix of business and private use, only claim the portion that is related to your business. For example, if you buy a computer for your business and your kids use it to do their homework or you use it to buy groceries online for your household, that’s private use. This means you will need to work out how much of the computer’s use was for your business – and only claim a deduction on that portion of the computer’s cost.
3. You must have records to prove it. Whether it’s paper or electronic it’s important to have a record, like a receipt for your business expenses. If you don’t, you may not be able to claim what you’re entitled to. You’ll also need to show how you calculated the business portion of expenses, if that applies to the expense.

• Read: Set up good management systems 
• Read: Employee tax and PAYG

Which tax concessions should I know about?

There are a range of tax concessions that your small business might be eligible for, but here are a few you should consider for your 2018 tax return:

• $20,000 instant asset write off – As mentioned earlier, you are able to immediately write off your assets under $20,000 each if you buy and install them by 30 June.
• Simplified trading stock rules – If you estimate that the difference between your opening and closing trading stock is $5,000 or less, you don’t need to do a stocktake. Instead, you can include the same amount for your opening and closing stock in this year’s tax return.
• Pre-paid expenses – You can claim a deduction this year if you prepay an expense that will end in the next financial year, for example the rent for your business premises or an insurance policy.
• Small business income tax offset – You can get an offset of up to $1,000 if you are a small business sole trader, or have a share of net small business income from a partnership or trust

You can find out more by visiting our page Concessions at a glance – where you can see what you can access based on your turnover.

What’s new for small businesses?

There are a few changes small business should keep in mind for example, from 1 July 2018 employers with 20 or more employees are required to start reporting through Single Touch Payroll, unless they or their payroll software provider  have been granted a deferral or they have been granted an exemption from the ATO.

Also, if you’re registered for GST and you import low value goods for business use in Australia, then you may not need to pay GST. You’ll simply need to tell your supplier you’re registered for GST, and provide them with your ABN. Find out more at Information for business purchasers.

What’s the easiest way I can stay informed?

Registered tax agents can help you with your tax and lodging your tax return. You can also stay up to date with us in a way that suits you. You can subscribe to the small business newsroom and receive what you need to know, when you need to know it, straight into your inbox. You can also follow us on social media, check out our Small Business Executive or find us on Facebook, Linkedin and Twitter.

If you want to ask questions online you can use our Live chat or visit our peer-to-peer forum ATO Community. But if you prefer to ask these questions and chat face-to-face, we host a range of small business workshops across the country, find out when we are visiting near you and come see us.

If you want more information but don’t know where to start, visit our page Supporting your small business. It provides a range of tools, services and how you can get in contact with us. We offer free, confidential and tailored support services aimed at keeping businesses on track, or helping them get back on track.