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Tax deductions for your small business

Tax deductions for your small business

Think about what deductions you can claim to help boost your business' tax return.

Preparing your business for tax time? Here are some potential tax deductions to keep in mind whether you’re preparing to submit your tax return yourself, or to meet with your accountant.

1. Instant business asset write-off

This is a rule that lets you immediately claim eligible business assets, like vehicles, machinery and equipment. These assets can be new or second hand and must be purchased and first used or installed ready for use by the cut off dates.

If your business turns over less than $10 million, you may be able to claim assets that you:

  • Purchased before 29 January 2019, that cost up to $20,000
  • Purchased between 29 January 2019 and 7:30pm (Sydney/ Melbourne time) 2 April 2019, that cost up to $25,000
  • Purchased between 7:30pm (Sydney/ Melbourne time) 2 April 2019 and 30 June 2020, that cost up to $30,000

If your business turns over between $10 million and $50 million, you may be able to claim assets purchased between 7:30pm (Sydney/ Melbourne time) 2 April 2019 and 30 June 2020, that cost up to $30,000.

For more information, visit the ATO website

2. Claiming depreciation of business assets

When businesses buy fixed assets, tax deductions are generally not available immediately (except in special conditions like the instant asset write-off.) Rather, the cost of the asset is claimed over time, reflecting its decline in value. This is commonly referred to as tax depreciation. Tax depreciation is complex and different rules can apply, depending on the type of asset and its use. In addition, certain small business entities may also elect to use the simplified depreciation rules to work out their tax depreciation claim.

For more information, please seek advice from a suitably qualified tax advisor. Information is also available on the ATO website.

3. Prepaid expenses

Running your own business can be expensive, but you may be able to claim some running expenses as tax deductions – including ones you pay for ahead of time. 

Prepaying some expenses before 30 June can increase your allowable deductions for the financial year. Eligible expenses include those that have a service period of 12 months or less, for example, annual policies, utility bills or professional subscriptions. Keep in mind that if you claim them this year, it will likely reduce your allowable expenses next year. 

4. Business account and loan expenses

Although these are not new, you should also consider whether you can claim the fees and interest from your business accounts and loans around tax time.

5. Deductions for personal super contributions

For the 2018/19 financial year, if you’re aged under 75 you may be able to claim personal super contributions made to an eligible super fund. Those aged between 65 and 74 need to meet the work test to contribute, which means you need to be employed for at least 40 hours over 30 consecutive days during the financial year.

When claiming a personal superannuation deduction for the 2018/19 financial year, it’s important to remember that the combined total of your superannuation guarantee payments, salary sacrificed amounts and your personal tax-deductible contributions can’t exceed $25,000 in a financial year or extra tax will apply. 

To make a personal tax-deductible contribution, you need to submit a valid deduction notice to your super fund within strict timeframes, and have it acknowledge by your fund in writing. If you intend to claim a tax deduction for personal contributions, refer to the ATO website.

6. Other deductions

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

Things you should know

  • This article takes into account the tax law and announcements as at May 2019
  • The Australian income year ends on 30 June. You have from 1 July to 31 October to lodge your tax return for the previous income year. If you use a registered tax agent to prepare and lodge your tax return, you may be able to lodge later than 31 October
  • Commonwealth Bank is 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
  • Taxation considerations are general and based on present taxation laws and may be subject to change. Double-check on the ATO website
  • As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances, if necessary seek professional advice

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.