The expenses you can claim and when you claim them depends on the type of asset or service purchased.

While there's more ruts, false turns and semi-concealed potholes to avoid in small business than you'd find on a beaten outback track, the road that requires some of the most careful negotiation is that which leads to the Australian Tax Office (ATO).

With the careful planning of your 'route', however, and a good understanding of the 'road rules', every small business owner is capable of ensuring a safe and lower-cost journey.

Although you need to remember of course that to evade the rules completely could possibly find you 'off the road' on a permanent basis.

“If you are unsure about the tax planning strategies that you and your accountant are using, you might want to get in touch with the ATO before they even attempt to call your attention,” warns professional financial advisor and Wealthfarm CEO Nick Sinclair.

“As a rule of thumb, Australian taxpayers – both private individuals and business owners – are obliged to conform to tax compliance standards set by the ATO,” he says in a blog on the Wealthfarm website.

“Tax compliance refers to a distinct set of practices followed by taxpayers to adhere to the taxation standards set in their country. In contrast, non-compliance to tax is the use of illegitimate tax strategies such as tax avoidance and tax evasion.”

Liam Shorte, principal of Verante Financial Planning, says your focus should be placed on “managing your tax and not looking at measures that will put your business under cash flow pressures in coming years, just to achieve a short-term tax advantage”.

“The expenses you can claim – and when you claim them – depends on the type of asset purchased or service engaged,” Shorte writes in a blog on the MYOB website.

“Operating expenses can usually be claimed in the year they occur, while capital expenses must be claimed over time. Private and personal expenses, such as after-school care or home loan interest payments, cannot be claimed (at all).”

“See if you can combine the benefit of bringing forward the tax deduction and getting a discount for paying your supplier in advance,” Shorte says. “For every small business looking for a tax deduction, there will most likely be a service provider or sales person looking to boost their sales results before June 30.”

Alan Osrin, managing director of Sage Software Australia, warns against some of the “ fanciful items small business owners have tried to claim as tax deductions”, such as Botox, adult ‘products’, fluffy slippers, a ceremonial sword and even a boat disguised as a car.

“It’s an alarming indication of the desperation felt by Australian small business owners trying to claw back tax deductions, despite the obvious issues the Australian Tax Office would have with these bizarre inclusions,” he writes in an article on the BRW website.

According to Osrin, to “legitimately claim every dollar your business is entitled to”, small business owners should “keep accurate business records and get your tax deductible expenses in order in the first place”.

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