Seven handy tax time tips to maximise your small business deductions this financial year

- September 23, 2021 3 MIN READ

It’s been anything but business as usual this year thanks to COVID. And with most businesses desperate to conserve cash amid uncertain trading conditions, maximising deductions is not a luxury but a necessity. These handy tax-time tips will ensure your business maximises deductions to conserve all-important cash flow, writes Helen Baker.

Learn from mistakes of the past and stay ahead of COVID-induced changes to ensure your business banks its fair share of deductions this tax time.

7 ways to maximise your business deductions

  1. Depreciation

Individually, the depreciation on a single item – such as a laptop or piece of office furniture – is not much. But given the sheer volume of depreciable assets most businesses have, that amount quickly adds up. Consider big ticket items too like fit-outs, air-conditioning and vehicles.  This year many businesses would have bought more items due to incentives.

Sadly, it seems many businesses under-declare eligible depreciations. Perhaps it’s due to time constraints or a need to get refunds processed quickly for cash flow purposes.

Either way, it’s money bleeding out of the business needlessly.

  1. Working from home

Employees forced to work from home due to COVID can deduct legitimate work expenses. This includes any furniture and equipment not provided by the company as well as the work-related share of utilities, phone, and internet.

If the business bought new laptops or other equipment to facilitate this transition, it can use the instant asset write-off to deduct those expenses, bringing forward the depreciation to the current tax year.

For the financial year ending 30 June 2021, the ATO’s shortcut method – introduced in response to the pandemic – remains in effect. But your true costs may exceed the 80 cents per hour rate, so don’t think that the easier option is necessarily better value.

  1. Superannuation

Most bosses know that employer superannuation contributions to workers are a deductible expense. But did you know additional contributions you make to your own super are personally deductible?

You may be entitled to the carry forward unused concessional contribution (or “catch-up”) rule for extra deductions, if your take home pay is low due to many write offs, you may be able to get co-contribution and you may also be entitled to a rebate if you qualify for spousal contributions.

There are caps on these extra contributions, however. And be sure to deposit funds before mid June so you can deduct them this tax year.

  1. Interest payments

With interest rates at record lows, many growing businesses have secured finance relatively cheaply.

Don’t forget that the interest paid on business loans and investments may be tax deductible. The same goes on any personal loans you have for income-generating activities.

Be careful to only claim the interest, not principal repayments – the ATO closely scrutinises this each year and for some those lines are blurred.

  1. Financial advice

I can tell you from experience that many business people don’t realise ongoing financial advice fees and income protection premiums are tax-deductible. Yet many accountants forget to ask about such costs, and so the deductions go unclaimed.

Generally speaking, ongoing advisory costs for income-generating investments are deductible; upfront Statement of Advice (SOA) fees are not.

For the self-employed, personal and business finances tend to be closely intertwined. As such, it’s important to have strategies for maximising both financial pots. That may mean separate deductions for personal and business advisory expenses.

  1. Grants and incentives

There have been so many COVID assistance measures rolled out that it can be difficult to keep track of what your business is and is not eligible for. But it’s essentially free money, so it pays to make enquiries.

With assistance from your advisors, check that you are receiving all incentives to which you are entitled. If not, apply for them. These could add up to thousands of dollars.

  1. Recordkeeping

As you can see from the points above, there are many genuine deductions a business can claim. It boils down to how much time you invest in keeping good records and the depth of discussions you have with your accountant.

By not claiming every eligible deduction and incentive, businesses are needlessly lining the pockets of the taxman. Can your business really afford to be that generous?

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