Whether you use a registered tax agent or manage your own during tax time, there’s a range of tips and enhanced tools to help you do it properly for your small business.
The expenses a small business can claim varies depending on it’s industry. You can claim tax deductions for most costs you incur while running your business.
Operating expenses are incurred during the course of the day-to-day operation of a company. These expenses can be office supplies, travel and distribution, research and development, and property taxes.
Most operating expenses incurred whilst earning income are tax deductible. These expenses are usually claimed in the year they occur.
Capital expenses are incurred when a business spends money, uses company assets, or takes on loan to either add to the value of an existing asset or buy a new asset. A capital expense is the cost of an asset that has a life longer than a year.
Capital assets which cost under $20,000 can be claimed fully the year they are bought. While those that cost more than $20,000 are claimed over multiple years.
Note: Operating expenses and capital expenses are treated differently for accounting and tax purposes. Entertainment, fines, and private or domestic expenses are excluded from business related deductions.
A small business which leases premises can also claim certain deductions. This depends on what the landlord and the business pays. It’s possible to claim electricity expenses, water expenses, phone expenses, and land tax, among other expenses on business premises.
The Australian Tax Office (ATO) talks about the ‘nexus’ between the income earned and the deduction. It can be claimed if there’s a nexus. There’s no deduction if there’s no nexus.
The small business tax offset can also reduce the tax it pays by up to $1,000 a year.
Those running small businesses often pay different tax rates, depending on the operational structure they have. If you’re operating as a company, the small business tax rate that you’d be charged is 27.5%. Although, you’d be charged a 30% tax rate if your aggregated annual turnover exceeds $50 million.
At individual income tax rates, sole traders pay the same tax as individual taxpayers. Although the rate for businesses operating through a trust varies depending on a number of factors.
The unincorporated small business tax discount, better known as small business tax offset, can reduce the tax you pay by up to $1,000 a year — depending on how a business is set up and is worked out on the proportion of tax payable on business income.
Note: For the offset eligibility, a small business must operate as a sole trader or have a share of net small business income from a partnership or trust.
If you are a small business and preparing your own return, you must lodge by October 31.
If you are using a registered tax agent, they’ll have different lodgment dates. Most registered tax agents have a special lodgment program and can lodge returns for their clients after the usual October 31 deadline. The due date will also depend on your personal situation.
If you’re using a tax agent for the first time, or using a different tax agent, you need to contact them before October 31 to take advantage of their lodgment program due dates.
Note: If you have employees, lodge the Pay as you go (PAYG) payment summary annual report to the ATO by August 14 each year.
Sometimes your small business runs low and that’s when you’ll feel the most pressure to act fast. When urgency is a priority, fast business loans could be your best move.
CBS prioritises great customer service and efficient delivery, with an online application process that’s as simple as possible. You’ll need to have a registered ABN, as well as a 90-day bank statement in order to complete your online application.