When you dive into the details of what SMB's can claim as tax deductions, the taxman is more generous than you've been led to believe. Do you your SMB tax break?
Tax BREAKS: gETTING your fair share before june 30With so much red tape, you’d be forgiven for thinking the Australian Tax Office (ATO) has a love-hate relationship with the country’s small and medium businesses (SMBs). However, when you dive into the details of what most SMBs can claim, the taxman is more generous than you’ve been led to believe. One eye-catching tax break can even save you thousands – but you’ll need to spend soon, because it ends June 30, 2017.
Let’s start there – the instant write-off of assets under $20,000, where any SMB with turnover of less than $2 million can purchase assets to the value of $20,000 and get an immediate tax deduction. This saves SMBs having to write down the value of the asset over subsequent years.
The most likely items here include software you’ve bought off the shelf for exclusive use in your business, or IT hardware such as desktop computers, laptops, tablets, printers and scanners.
You can also claim an immediate deduction for the cost of developing software – so long as it’s for use exclusively in your business and costs less than $20,000. However, this tax break doesn’t apply for SMBs that have previously chosen to claim deductions for in-house software under the software development pool rules. Your accountant will know more.
the time to act is nowThe $20,000 tax concession is great for SMBs that have a real business need to update their IT. But time is of the essence. While this tax break applies to assets purchased after 12 May 2015, it ends on 30 June 2017. You’ll need to make your purchases before then. Talk to your accountant about how to maximise your return.
the day-to-day expense deductions you must not miss
Operating expenses are the costs you incur in running your business – such as stationery or renting office space. These costs are sometimes called working expenses. You can claim a deduction for most operating expenses in the same income year you incur them. For SMBs, such IT-related expenses might include:
- Education, technical or professional qualifications.
- Insurance premiums on your tech gear.
- Interest on money borrowed to buy your tech gear.
- Renting or leasing business premises to house your tech gear.
- Legal expenses, such as those incurred borrowing money or obtaining tax advice.
- Costs of running a commercial website, such as site maintenance, content updates and internet service provider fees.
- Tax agent and accountant fees.
big purchases can bring big breaks
Capital assets – items with some longevity – include buildings, motor vehicles, furniture and of course some IT equipment. SMBs can claim as a capital expense:
- The cost of an asset that has a longer life (usually more than one income year).
- An expense associated with establishing, replacing or improving the structure of your business.
got a website?
You might be able to claim the expenses you incur in creating and maintaining a website for your business, such as the costs of software, website development, domain name registration and server hosting.
You can claim these deductions in the year you incur the expenses. You can also depreciate the costs of a website over time. You do this by various depreciation methods, including putting the expenses into a pool – another one for your accountant.
Remember, the worst thing you can do at tax time is avoid your share. The second worst thing you can do is pay too much. So check with your accountant and make sure you’re getting back exactly what you deserve.
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