Running a business is not easy since the more you earn an income, the more expenses you incur most, especially when paying taxes. However, some universal rules help the business to claim a tax deduction on various costs that the company incurs in the long run. Some may be easy to detect while others are somewhat hidden. Well, that is why we are here for you! This article will discuss the top five tax deductions to keep in mind, which is not easy to identify.
- Interest
Although it is well known that one has the right to deduct money off the interests paid on a borrowed loan, there are some hidden interests that you can also deduct. These interests are not well known by some people. For example, any claims that your business incurs and is not paid by the next time you file for tax (30th June) are deductible.
In the case where you loan your business money from a credit card or use a personal loan, you can claim a deduction in the income tax. This is because the interest cost will not be part of the business but from your income.
- Depreciation
Assets are not always guaranteed to appreciate over some time. Thus, if your assets depreciate, save some bucks by claiming for a tax deduction. There is a tax rule governing small business owners who own assets in Australia. If the asset has a value of around 6500 dollars, you can claim a tax deduction or write off.
- Motor vehicle
Again this is another area where the small business owners can benefit from. You can depreciate the vehicles in your company ranging from vans, trucks, and other personal vehicles. The deduction is made as follows;
100 per cent of 5,000 dollars of the actual costs and 15 per cent of the remaining cost amount in the year of purchase. Also, note that if the vehicle’s price falls under the 6500 dollars, then the whole amount will be written off.
An example
If you bought a business van at 14000 dollars, the first deduction you will receive is 4,200, calculating it with 100 per cent.
- Trading stocks
How often do you take stock in your business? Did you know that you can get some tax deduction from the stock available in your company? The stocks include any products manufactured, sold, and even items for resell in the company. If there any that are lost, damaged, or not in use before the next tax day, you can write it off from all the stock in the company.
How is a deduction made?
If the stock value in the company depreciates or appreciates with around 5000 dollars, you need to figure out the amount the stock changes with before the following tax date. If the stock’s value has appreciated, then the extra money is calculated as an income, and you will be taxed. However, if the stock depreciates, then you can file for a tax deduction.
How do you calculate the stock’s value at the end of the year or the tax date?
The value you bought the stocks at, the current selling, value the stocks are at, and any value of maintenance incurred.
- Bad debts
This happens when customers fail to settle their debt. If you have sold out services or products to a customer(s) and fail to pay the payment, then you can file for a tax deduction. A debt is calculated as a bad debt if it stays for about 12 or more months before being settled, and there is no sign of settlement.
Conclusion
These are the top five areas where you can file for a tax deduction if you have a small business. As you can see, these are some of the expenses that are quite difficult to figure out, especially if you are not keen. For example, you don’t have to pay for tax on stocks that have depreciated or damaged.
New Standard
The Australian Tax Office has released its standards to make things easier for a small business deduction. There is information on the website, including how to take advantage of these new offerings.
Do you think you may qualify for these deductions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.
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