May is here which means we’re nearly at the end of the 2011-12 financial year. So, whilst there’s still time to get things in place, we thought now might be a good time to highlight a couple of things that could make tax time for your business easier or put/keep more dollars in your business’ pocket.
What can you deduct?
During the course of running your business you’ve probably incurred a number of expenses. Some of these are run of the mill such as stationery, office expenses, rent, telecommunications, motor vehicles, stock and salaries.
Possibly however, you’ve paid for some things that made you wonder whether deducting them is possible. For example over the years, Kerry and I have been asked questions about claiming such things as Austar, a pushbike, a boat, gold-pass movie tickets to name just a few.
And the answer is that depends. It depends on what kind of business you run, how much of the expense you’re thinking of deducting and what others in your industry do. Really the only way forward on these types of claims is for you to seek advice. Make sure if you’re considering claiming it, you’ve kept a record, invoice or receipt.
Let’s look at some of the other frequent items we get asked about.
Entertainment & meals
One of the recurring questions we get asked is about coffees, lunches, dinners – usually dropped in the basket called entertainment.
Entertainment expenses are generally not claimable, but there are many situations where claims for meals are available such as overtime meal allowances, travel away overnight for work, morning and afternoon teas and light lunches provided by an employer during the working day to employees.
In terms of clothing, unless you’re a clothing retailer, designer or something else to do with fashion, you can only claim specific work-related clothing (steel capped boots, uniforms, safety gear, etc). And if you or your staff often work outdoors, you can also claim sunglasses and sunscreen.
As for accessories, you can claim briefcases, laptop bags and anything else used for the sole purpose of your business. Ladies, sadly handbags don’t qualify unless provided as a gift to an employee with a value less than $300.
Work-related motor vehicle expenses
For sole traders, partnerships and employees there are four methods you can use to claim a deduction on your vehicle if you use it for work purposes. These are;
- Cents per km
- 1/3 of actual car expenses
- 12% of original value
- Log book (kept for every trip you make regardless of purpose for 12 weeks and updated every 5 years)
Keeping detailed records assists us in getting you the maximum allowable deduction on these expenses. If it’s been 5 years since you or your staff members have used a log book, best start thinking about recording your mileage again now.
Special rules apply for utilities and vehicles designed to carry more than one tonne.
For businesses operated through a company or trust the first 3 methods above are not available as fringe benefit tax rules apply. So, a log book must be kept or a statutory formula is used to calculate the deemed private use.
Some things to consider from last year’s budget
Motor vehicles – Any vehicles purchased after July 1, will be eligible for an immediate tax deduction of $5,000 upfront and then you’ll be able to depreciate the remainder at 30% a year. Which means, if you’re considering purchasing a car, you might want to seek advice before making the purchase.
Small purchases – If you have a couple of small asset purchases (furniture, computers, etc) that you were thinking of buying between now and the end of the financial year, depending on your individual circumstances, you might want to hold off. On July 1, 2012 the threshold for immediate asset deductions, as opposed to having to write assets off over a number of years, will be raised from $1,000 to $6,500 for small business (generally this only applies to businesses with turnover less than $2 million) Again, seek advice if you’re considering asset purchases between now and June 30.
Other financial considerations
Investments – Prior to June 30, you may want to review your portfolio and realise any capital losses, particularly if you have already earned capital gains during the year.
Superannuation – If you’re aged 50+ with a balance of less than $500,000 in your super account, from July 1, 2012, you’ll be able to continue to contribute an extra $25,000 a year on top of the current allowable contribution of $25,000.
If you do have some extra funds available that you’re thinking of putting towards your super, now is the time to consider how much. Also consider the benefits of establishing your own Self Managed Super Fund (SMSF) which now also allows borrowings to purchase property.
Stay tuned. The next Federal budget will be handed down next week and we’ll let you know if there’s anything particularly unusual or beneficial contained within it.