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6 tax deductions for your small business

6 tax deductions for your small business

Find out what deductions you can claim to boost your business’ tax return.

The tax deductions available for your small business can change every year. Being across the latest deductions available can be an easy way to reduce your tax liability. To save you time, here are six tax deductions worth knowing about.

1. Purchase of a business asset that costs less than $20,000

If you purchase a vehicle, machine or piece of equipment that costs less than $20,000 before 30 June 2017, you could get an instant deduction. To qualify for this benefit, you’ll need to be an eligible small business and have used or have the asset ready for use before 30 June 2017.

The Federal Budget 2017-18 announcement on 9 May, 2017, proposed an extension to the asset write-off program for an additional year.

The government proposed extending the $20,000 immediate tax deductibility threshold for a further 12 months to 30 June 2018. The turnover threshold might also be increased to $10m in annual turnover if the proposal becomes law.

Any changes outlined in the Federal Budget must be passed by both the House of Representatives, which is controlled by the government, and the Senate, where proposed expenditures are subject to examination within Senate estimates hearings.

This means any proposed cuts or changes outlined above may not necessarily become law.

2. Prepaid expenses

Another deduction eligible small businesses can claim are prepaid expenses. You can claim a deduction this year if you pay for next year’s insurance policy, utility bill or professional subscription before 30 June.

3. Business account and loan expenses

Although these are not new, don’t forget to claim the fees and interest from your business accounts and loans around tax time.

4. Sole traders’ and partners’ super contributions

For sole traders or partners between 18 and 75 years old, you’re eligible to claim a deduction for your super contributions if you’ve:

  • Contributed to a complying fund
  • Given valid notice to your super fund
  • Earned a wage or salary that makes up less than 10% of your total income.

Contributions made after 1 July 2017 will have a different set of rules – for example, this deduction will no longer be restricted to sole traders and partners.

5. Start-up costs

If you’ve started your small business this financial year, keep records of your setup costs handy. You may be able to claim these as a deduction if they were for:

  • Professional advice on your proposed business structure or operation
  • Government fees, taxes or charges to set up your business structure – the fees to create your company, for example.

6. Other deductions

There are many other expenses you pay to keep your business running or help you earn business income, most of which are typically tax deductible. You can find more information about claimable deductions on the ATO website or by speaking to an accountant.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law. This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information.