10 Most Overlooked Tax Breaks and Deductions

Small business owners often dread tax time. It is so easy to see the downside of tax time that it may become a habit to overlook some available benefits that will give you tax relief, such as a tax break or a tax credit.

If you’re a small business owner, you will want to take note of the Australian Taxation Office’s (ATO) tax deductions available to you. When doing your tax return, there are various deductions to be claim against work-related expenses.

The following is a list of commonly overlooked tax deductions that you can claim when completing your federal income tax return to provide you and your business tax relief.

1. Asset Acquisition

If you’re looking for new assets, they may be beneficial to you during tax time. Sole traders and small businesses have received a $150,000 tax deduction for any eligible business expenses.

This can include brand-new or second-hand items related to your business. It is important to note that the asset must be installed and ready for use by June 30 of that tax year. Paying for it or receiving an invoice is not enough.

2. Union Fees

This is good news if you are part of a union. If, every year, you pay union fees, you are entitled to a tax deduction under ATO’s “D-5 Other” work-related expenses.

3. Donations

Many people are aware that donations can be tax deductible, but not everyone is aware of how this works.

Donations of at least $2 to a charitable organization are tax deductible with a receipt. However, this does not apply to all donations.

In order to be claimable, donations must be made to a deductible gift recipient listed under the Australian Business Register. You won’t usually receive a tax exemption from private donations, such as GoFundMe.

4. Rental Property Expenses

Many small business owners forget that rental expenses can be claimed. Often forgotten deductions include:

  • Bank fees
  • Gardening and lawn mowing
  • Pest control
  • Security patrol fees
  • Secretarial and bookkeeping fees
  • Travel and car expenses for rent collection
  • Inspections of property and maintenance

Don’t let these rental expenses go unclaimed. Claiming these eligible expenses may add up to a decent amount of tax relief.

5. Home Office Expenses

If you work from home, you may be able to claim home office expenses, such as “occupancy costs,” as tax deductions. This may include the cost of your personal computer, equipment, software, furniture, heating, lighting, and a percentage of your rent/mortgage.

However, it is important to note you may not be eligible for the full tax exemption if your home is your principal place of business.

6. Working from Home Expenses

The COVID-19 pandemic has made working from home a popular and necessary option for businesses everywhere. For this reason, the ATO has temporarily established a shortcut method. This has been done to calculate these particular expenses with minimal required record keeping. No need for receipts or invoices.

This deduction is great for small businesses and workers alike. To be eligible for this deduction, all you need are timesheets, rosters, a diary, or other documentation to prove you worked from home.

Although originally limited to the period from March 1, 2020, to June 30, 2021, the ATO has suggested the period may be extended depending on the ongoing state of the situation.

7. Work-related Car Expenses

Cars are expensive to buy and to maintain, so why not use them to your advantage during tax time?

If you’re a business owner who uses their personal car for work-related reasons (excluding driving to and from work), you can claim the cost of fuel and maintenance as a tax deduction.

To be eligible, you must be the owner of the car, and the trips you make using the car must be related to your work. An example would be driving between offices, or from one work site to another.

8. Education Expenses

You can claim self-education expenses if there is a connection between the course you take and your current role in the business. If this is the case, you may be eligible for the following tax deductions:

  • Textbooks
  • Stationary
  • Photocopying
  • Computer expenses
  • Student fees, such as union fees, student services fees, and amenities fees
  • Home office expenses
  • Allowable travel expenses if you have a room specifically for studying

You may also be eligible to claim accommodation and meals, but this only applies if your course requires you to be away from home for one or more nights.

According to the ATO, there are five categories of self-education expenses. Depending on which category your expenses fall in, you may reduce your deduction by $250.

9. Internet and Mobile Phone Expenses

You may be able to claim your internet expenses as a deduction if you work from home and have your internet connection in your name. For this, you will have to estimate your monthly work use as a percentage of the total monthly household use.

Likewise, as a business owner, you can claim the cost of your work-related calls. This cannot include your entire phone bill. For accuracy, it is best to keep a logbook of all of your calls on your personal phone to best estimate the average percentage of calls that are work-related.

10. Medical Expenses

Medical expenses are one of the most commonly missed deductions. Unfortunately, the net medical expenses tax offset is no longer available for your tax bill from July 1, 2019. However, you may still be eligible for this offset for income years from 2015–16 to 2018–19.

To make sure that you do not miss out, watch for claims for net eligible expenses for disability aids, attendant care, or aged care that you may have had in the past five years.

Learn more about the medical expense tax offset on the ATO’s website.

Every year, many small businesses miss out on tax breaks because they are not aware of what expenses are eligible as tax deductions. To make sure that you don’t miss out, check out the ATO’s website to stay up to date on eligible tax deductions.

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