Small business owner have good chances of tax deductions
As the end of financial year approaches, we all get worried about the ATO files for sure. You must plan your taxes well so that you do not get into trouble. The more equipped you are with the knowledge of what is your income and expense regarding the small business that you earn the better it gets for you when you file your ITR
As a self-employer or founder of a home based business, it is a wholesome journey to reach your final ATO income and deductions with proper disclosures and deductions. There are many tax professional and software’s that are available to help you in your financial year Tax Return Sydney. Nevertheless, it is always recommended that you have a fundamental knowledge yourself about your income and expenses so that it makes the process simple and easy, and you know what you are paying for. You file an individual return that is taking its toll on you, we can imagine the plight of the additional business return that you have to file, and it must be overwhelming!!
Being a home-based business owner, it yields many rewards for you. Home-based business owners not only experience great shifts in their work-life balance, but also experience highly improved motivation with the fact that they are their own boss and the whole experience of working on something that they are passionate about. They get many financial rewards too. Main amongst them is the eligibility to claim certain tax deductions.
A good knowledge of what you can claim as a deduction significantly reduces the amount of tax that you are liable to pay.
When you possess a small home based business, must you keep your business and personal expenses separate to ensure easy accounting. There are many expenses that overlap this area and falls under a situation when it becomes difficult to determine how much amount should be kept aside for what. Here are a some practical tips for you.
The other deductible expenses that are peculiar to home-based businesses are occupancy expenses, running cost and vehicles expenses.
Occupancy expenses are expenses related to owning, renting or using the house, these are not necessarily related to a home-based business but mostly to all such small business. These expenses include rental payments, council rates, mortgage interest, bills and house insurance premiums.
Your home-based business area need to pass the “interest deductibility test” if it does then you are can claim occupancy expenses as tax deductions. In order to pass this test, make sure that your business area is definable from the rest of the house, when you have a home based business. Even if it is a small part of the whole house make sure that it is used only for specific business purpose, keep things separate and organized. These goes a long way in determining and separating business expenses from personal, the business space should exclusively be used by you or your clients for business related work. Let’s say when you claim such expenses; you can divide the whole bills by the area of the house and your hoause and easily get to the amount that accounts for your business expense. It makes things easy for you to explain in front of the auditor. A word of discretion here; be very careful while claiming some of these expenses like the mortgage interest claims as they might subject to capital gains. A distinction and a thorough understanding are needed here.
You claim all your expenses as the deduction similarly; running expenses are included in deductions. Running expenses are any cost that comes from you using the facilities of your house as part of your business it includes expenses like that of electricity and gas cost, phone bills and cleaning costs of the area of the business.
These expenses are addition to the regular home expenses. The regular home expenses are acquired, as a result, of running your business from your house.In such a case, you are allowed to claim these expenses as deductions, yet please be mind full of the fact that even though they can be deducted they should involve only amount of actual usage for business, not the personal house expenses.
Various methods can be used to calculate the proportions and deduction amounts. One easy way is to find the percentage of floor area which is used for the business purpose as oppose to that used for the entire area. This percentage gives you a fraction that can be applied to calculate the amount of cost for utilities involved in business. Another way is to calculate the cost of utilities of the whole area and the compare the before and after cost of setting up the home based business the resulting difference is the amount that is used for the home based- business.
Be prepared to provide information to support the claims you are making, you should be able to confirm that the claims are reasonable and used only for business and private or domestic proportion of the expense has not been included.
You often use your own car for business purpose several times a month not realizing that you can claim deduction for the same. Home-based businesses are entitled to claim deduction related to any travel costs they incurred which is business-related travel. If you are carrying on a home-based business then you can claim deduction for all your travel expenses like that of going to a client’s premises, making a purchase of an equipment or any form of supplies or doing your bank work, or sending mails or when you visit your tax advisor.
The most important tip for any business owner and specially home based business owner is to document everything. Keep record of all the Receipts and invoices. They might be small and insignificant information but when combined they form a lot of amount and a substantial amount of deduction can be made using them this greatly reduce your tax liability and who wants to pay more taxes.