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Running a small business – what’s deductible?

When you’re running a small business, you want to make sure you’re making your money work as hard as you do. This often extends to legally minimising your tax where you can, and there are plenty of ways to do so – even from day one. Here are a few you can look for:

Start-up Costs

Even before you open your doors for the first time, you can claim some costs for your small business. The start-up process can be long and arduous, which is why most savvy entrepreneurs start on the right foot by seeking professional assistance in the early stages. This can include engaging an accountant to help set up the most appropriate structure (for even further tax minimisation down the track); or government fees like stamp duty, registration with official bodies, and more. As with any deduction you wish to claim, make sure you keep a record of how much you paid, to whom and when you paid. If you engage an accountant to maintain your compliance obligations once you’re in business, they will generally know to claim these costs on your behalf.

Operating expenses

Perhaps a more common deduction for business owners (of all sizes) is the large range of equipment and supplies needed to run the business. While different enterprises will, of course, require different things to help it carry out day-to-day operations, the common theme is that generally all businesses can deduct the cost of these items at tax time. Common deductible expenses include advertising costs; stationery; phone expenses; council rates on the business premises; transport and freight expenses; plus a number of others. Generally speaking, you can claim a deduction for most operating expenses in the same income year you incur them.

Wages and Superannuation Guarantee (SG) payments

If you run a small business and employ people to work for you, you’d be paying wages and Superannuation payments, and reporting those figures to the ATO. Remember, though, that the amount you pay overall in wages and super is tax deductible. Deductions are calculated based on which type of business you run, for instance your company or trust can usually claim a deduction for any salaries and wages it pays to you or other workers, if you run your business as a company or trust. If you run it as a partnership, the partnership cannot pay you salary or wages (as you are not technically an “employee”), and any nominal payment to a partner is generally a distribution of profit. As such, this arrangement does not constitute a deductible payment. For sole traders, the same applies as the partnership, however you can usually claim a deduction for your own super contributions in your personal tax return. Again, income you receive in this arrangement is treated as a distribution of profit rather than a salary or wage.

If you are in business, and you want to ensure you are getting everything you’re entitled to, the best bet is to engage an accountant. At McKinley Plowman, our roots as a start-up and small business mean we know how important it is to you that you minimise tax and maximise profits, and our clients have experienced amazing success leveraging our experience and knowledge. Give our small business accountants in Perth a call today on 08 9301 2200 or contact us via our website www.mckinleyplowman.com.au.

References

https://www.ato.gov.au/Business/Income-and-deductions-for-business/

written by:

Ben Teti

Ben’s career began in April 2008 specialising in taxation and business advisory by managing a small portfolio at a young age. He joined McKinley Plowman in 2014 as a Senior Accountant and with his passion for business and assisting clients in achieving their objectives he has progressed to a Business Services Manager, and more recently being appointed as an Associate Director.

As a qualified Certified Practising Accountant, his areas of expertise include but are not limited to, assisting clients with new business start-ups, advising on business structures, tax planning, business valuations and management reporting across many industries.

Ben prides himself on being part of his client’s business journey in taking them from where they are now and working towards where they want to be.