5 Expenses You Didn’t Know Were Tax Deductible

The project of operating a business is one that is fraught with the constant need to balance competing considerations. Ideally, you want to conceive a business that is both sustainable and profitable. In reality, these characteristics often manifest at the expense of one another. This is because the most efficient strategy is not necessarily the most ethically viable one. The same applies vice versa. Therefore, the challenge for the business owner is to boost returns without compromising the quality of providing goods and services. Arguably, one of the best avenues in realising this agenda is to take advantage of a variety of tax-deductible expenses. Tax-deductible expenses generally reduce the level of your businesses’ “taxable income”. At the end of the day, this means more money in your pocket to grow your business.

1. Legal Expenses

When a client refuses to compensate you for the agreed price of delivering particular and goods and services, seeking legal advice may be your only option. Realising this fact can be daunting given that it is widely known that legal expenses can be crippling for some businesses. However, it should be a relief to understand that as a general rule of thumb – legal expenses incurred through the operation of a business are tax-deductible. The exception to this rule is when the legal expense is of either a ‘capital, domestic or private nature’.

Example
A business cannot claim a deduction for legal expenses relating to the establishment of a person will. Alternatively, you may be able to seek a deduction for legal advice sought in relation to pursuing damages in a breach of contract dispute.

2. Home Office Expenses

If you run a business at home, it is possible to get tax deductions for significant expenses such as rent, electricity and mortgage leases. You are also eligible to receive tax deduction for office supplies expenses such as:

  • Stationary expenses
  • Furniture used solely for the business
  • Electronic equipment such as computers or monitors

3. Travel and Accomodation Expenses

Although travel expenses may not seem significant when viewed in single transactions, they certainly add up over time. On the hand, accommodation expenses can be extraordinary. According to the ATO, you are able to claim a deduction that your business accrues through business travel expenses.

Example
Your business can claim deduction for paying for employee travel such as airfares, train fares, bus fares and taxi fares.

However, overnight business travel expenses are subject to more scrutiny. Claimers must keep a detailed record of the expenses they intend to claim

4. Work Clothing and Outdoor Protective Gear

Businesses are entitled to tax deductions for expenses incurred in purchasing work-related clothing

Example
Relevant items of clothing include uniforms, high visibility vests and hard hats.

5. Tax Losses From a Previous Year

tax loss occurs when ‘the total deductions you can claim for an income year exceed the total of your assessable and net exempt income for the year’. Your business can carry forward a tax loss incurred in the previous year and claim a deduction for such losses in the current year.

In summary, claiming tax deductions for work-related expenses is a typical way for businesses to retain the extra capital that could be invested in expansion projects. Our Business Lawyers are well-equipped to outline any further expenses which may be eligible for a tax deduction.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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