5 tax tips for small businesses – Business expenses

A few tips that small businesses should consider when preparing their tax returns are:

1. Check if you are applying the correct company tax rate;
2. Check if you are entitled to the small business income tax offset;
3. Check if you are entitled to a small business CGT concession;
4. Ensure that deductions are only claimed for business (not personal) expenses; and
5. Keeping the right records to support your claims.


Business expenses

Generally, a small business can deduct expenses that are related to earning assessable income and are incurred to run the business.

Common expenses that may be deducted include:

  • salaries;
  • rent or mortgage interest expenses;
  • running expenses – eg lighting, phone, internet, stationery; and
  • some travel expenses.

The line between business and personal expenses can easily be blurred when it comes to travel expenses. Make sure travel expenses are correctly characterised (or apportioned) as business or personal expenses.

The general rule for businesses is that you can claim deductions for expenses if you or your employee are travelling for business purposes. Such expenses can include:

  • airfares, bus, train and taxi/Uber fares;
  • car-hire fees plus fuel, tolls and cap parking costs; and
  • accommodation and meals if you are away overnight.

You must keep proper tax records to claim travel expenses. The records need to be kept for 5 years and can include tax invoices, boarding passes, tickets. Records are also needed to detail how you worked out the private portion of any travel expenses. For example, if you travelled for business but extended the stay to go sightseeing and have a holiday. In this case, you will need to work out an appropriate apportionment of the expenses.

Depending on the length of travel, you may need to keep a travel diary as well. In fact, the ATO highly recommends a travel diary is kept for all travel expenses.

Some expenses that may be characterised as private and are not deductible could include:

  • costs incurred to take your family on a business trip;
  • sightseeing and entertainment; and
  • visas, passports or travel insurance.


This link will give you an idea of what is expected by the ATO in a travel diary – https://www.ato.gov.au/

5. Keeping the right records >

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Thompsons Australia Newsletters and articles are distributed by professional tax practitioners to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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