Deductibles, fringe benefit tax, depreciation – there’s a lot to learn when it comes to end-of-year tax returns. And even if you’ve been running your business for a while, tweaks, updates and rule changes from the ATO can make it hard to keep up.
Here’s what you need to know about the most recent changes to tax rules: *
Temporary full expensing.
As part of its COVID-19 response, the Australian Government introduced a temporary full expensing program, allowing eligible businesses to deduct the total cost of qualified assets acquired between 6 October 2020 to 30 June 2023. This means that instead of claiming the partial cost of an item throughout its life – that is, depreciation – you can claim the full cost immediately, reducing your taxable income for the year. With the scheme extended to June 2023, it’s a great way to offset your expenses and keep that tax bill to a minimum.
Instant asset write-offs expansion.
Under the instant asset write-off scheme, eligible businesses can claim an immediate deduction for the cost of an asset or the business portion of the cost for shared assets, in the year the asset is first used or installed.
While this has been part of the tax system since 2015, it was expanded in 2022 to include eligible assets up to $150,000 in value for businesses with an aggregated turnover under $5 billion. If you’ve purchased work vehicles or other substantial assets this year, you could make a significant dent in your taxable income.
Simplified trading stock rules.
Under simplified trading stock rules, businesses with an aggregated turnover of less than $10 million can estimate the value of their inventory rather than completing a physical stocktake. Of course, you must be able to justify your estimate with purchase receipts or by comparing it to last year’s stock. If your business is eligible and you can supply an accurate estimate, it can be a great way to save some much-needed time during a busy part of the year.
Changes to work-related expenses deduction.
Work-related deductions used to run at least partly on trust. Now, changes to the rules mean that claims for certain expenses, including mobile phone calls, internet, home office and travel, must be substantiated with receipts or other records.
To ensure you don’t miss out on a potential deduction, keep track of spending in these areas. This could mean saving phone and internet bills, keeping a log of business-related phone calls to estimate a portion of the costs and hanging onto receipts during business travel.
Changes to the research and development tax incentive.
If your business includes a research or product development component, changes to the research and development (R&D) tax incentive may benefit you. The main changes are a reduction in the R&D tax offset rates and an increased expenditure threshold from $100 million to $150 million.
Keep track of changes to maximise your returns.
When you’re a small business, every cent counts and the EOFY tax return can be a great opportunity to claim back some of your expenses for the year. With rules around tax rates, eligible deductions and documentation changing all the time, it’s far too easy to miss a potential deduction. Keeping up with the rule changes could mean you’re on your way to minimising your taxable income and maximising your return.
Check out 10 things you didn’t know you could claim on tax to get started.
*We endeavour to provide accurate material for Australian businesses consistent with Australian laws; however, this material is for reference only and is not designed to be, nor should it be regarded as professional advice.