Are you new to running a small business? Or perhaps you aren’t quite so new, but still have difficulty understanding corporate taxes. Read on to learn tips and tricks about organising your taxes and information for this year’s business tax return.
Small business accounting can often be more difficult than running a larger business because you might be on your own or have no experience, that’s why you need all the help you can get from Melbourne accounting services.
What expenses can you write off for a small business?
Many people are unaware of the sheer amount of goods that they can deduct on their tax return.
Even if you are unsure whether you can claim something, it is always worth keeping your receipts and trying to deduct them when you lodge your return. Because what’s the worst thing that could happen?
Anything you buy and use for your business is considered a business expenditure. This can include items you, an employee, or colleague use.
When running a business, you must keep receipts of everything you buy and use for your business or you won’t be able to claim them as deductibles.
Examples of things you and your employees can claim include:
- Rent, such as for an office space, warehouse, or factory
- Assets, such as investments
- Equipment, such as a machine or a computer
- Car use, including registration
- Accommodation if you’ve travelled for work
You should never claim a deduction without evidence, as this may result in the deductions being rejected by the ATO.
How do you keep business and personal expenses separate?
A personal expense is something for your own use that does not relate to your business, such as food, clothes or appliances.
You need to keep your personal expenses and business expenses separate so that when lodging your personal tax return or your business tax return, you don’t have unnecessary receipts that will confuse a tax agent.
Perhaps you buy something with the intention of just using it at home, for example expensive wood that you want to build a shelf with. Maybe a few months later, you realise you can use this wood to build something work related, like a desk.
This is why you should also keep your receipts for your personal expenses in case you end up using the items for work – which can then be considered a deductible.
There are a few ways you can keep your business and personal expenses separate so that they can be neat and organised and not accumulate into one big pile of paper. These ways include:
- Make payments for business expenses out of the business bank accounts and avoid making personal payments out of business bank accounts
- Sectioning your filing cabinet
- Hiring a bookkeeper to help manage your day-to-day bookkeeping
- Choosing a small business accountant in Melbourne
- Relying on a small business tax agent to manage both personal and business tax returns
Can I deduct my home Internet as a business expense?
You can deduct internet on your business tax return in Melbourne only if you work from home.
Even if you only work one day a week, then you can claim it as a deduction as long as you have the right receipts such as in an email invoice from your internet provider.
When you do this, please make sure you keep a working from home diary for a 12 week period to determine the work related usage percentage. This is the best way in making an estimation of how much of the internet you’ve paid for in the past year has been used for your work.
If you request all the money you’ve spent on internet as tax deductible, then the tax office is likely to challenge it because you most likely have other family members use the internet or you use it outside of work.
What deductions can I claim without receipts?
You can claim up to $300 of deductions without any receipts when filling out your tax return forms.
How much can a small business make before paying taxes?
The amount you make before paying tax depends on the tax structure of your business.
The four main types of tax structures for businesses are:
- A trust
- A company
- A partnership
Most small businesses are run via an individual tax structure, being a sole trader, which is taxed in personal tax return.
For this tax structure the tax free threshold is a net profit of $18,200 a year.
For other tax structures it can be more complicated. We invite you to book an appointment with a tax agent to find out more information.
What happens if you get audited and don’t have receipts?
Auditing is when an auditor examines your financial reports and your tax reports to see if you are meeting all your legal business requirements.
If you have claimed deductibles, they may request to see evidence in claiming those deductions. If you don’t have any, the deductions may be denied by the tax office. You could also be subject to a fine.
How long do I have to lodge my taxes?
From the first day of the financial year – 1st of July – you can access and submit your tax return. From that date you have until the 31st of October that same year to lodge it.
However, if you have an accountant helping you out, you will have an extension from this date which depends on the accountant and your business.
Need help doing your business tax return?
Still confused? No need to get stressed out: a small business accountant in Bayside can settle all of your tax-related inquiries so you don’t have to do the hard work.