Ready to reduce your tax bill? Quickly learn what deductions you can claim to reduce your taxable income this financial year, whether you’re a business owner or an individual. This guide breaks down the key deductions available for the 2023-2024 financial year, helping you claim what’s rightfully yours.
Our financial brokers at ODIN are dedicated to helping our customers make the most out of their finances for their personal and business use.
Small Business Tax Deductions
Operating Expenses That You Can Deduct:
Your regular business expenses are generally deductible. This includes costs like:
- Office Supplies: Such as stationery, printers, and software, which keep your office running smoothly.
- Advertising and Marketing: Whether it’s boosting your presence online through digital campaigns or hitting the local market with traditional methods, these costs are deductible.
- Rent and Utilities: The costs of maintaining your workspace, like the rent, electricity, and internet bills, are all deductible.
Pro Tip: To make the most of your deductions this year, consider prepaying expenses such as insurance premiums or rent.
Instant Asset Write-off and Energy Incentive 2023-24
The 2023-24 Federal Budget introduced significant benefits for small businesses aimed at encouraging investment in new assets and energy-efficient technologies. (Please note, as of writing, these are proposed changes. Businesses MUST first ensure that these changes are indeed put into effect.)
Here’s a breakdown of the key provisions and what they might mean for your business:
Instant Asset Write-off: Small businesses with an aggregated annual turnover under $10 million are eligible to immediately write off the full cost of multiple assets, provided each asset costs less than $20,000. This applies to assets acquired and ready for use between July 1, 2023, and June 30, 2024.
Energy Efficiency Incentive: For small businesses with a turnover of less than $50 million, there’s an additional incentive to invest in energy efficiency. Businesses can deduct an extra 20% for expenditures that contribute to electrification and improving energy efficiency. Eligible upgrades include:
- Electrifying heating and cooling systems
- Upgrading to more energy-efficient refrigerators and induction cooktops
- Installing energy storage solutions like batteries and heat pumps
The total spending cap for this incentive is $100,000, with a maximum tax deduction of $20,000 per business. These deductions apply to eligible assets or upgrades first used or installed between July 1, 2023, and June 30, 2024.
Important Considerations:
It’s crucial to note, as mentioned earlier, these measures are proposals at the moment and have not yet become law. Businesses should verify that these provisions are enacted as described before making any financial decisions based on them.
If your business qualifies under these criteria, you could potentially claim deductions for asset purchases or upgrades on your 2024 tax return. However, since the rules surrounding these deductions can be complex and the eligibility for such incentives may vary, it is advisable to seek independent professional tax advice before making any purchases or upgrades. This ensures that any investment made is both compliant with the latest tax laws and financially beneficial for your business.
Read the latest updated Info Sheet for depreciating asset tax deductions for businesses.
Working From Home Tax Deductions
When working from home, certain running expenses that go beyond typical household expenses can be deducted. These expenses must be directly related to the use of your home for work purposes.
To be eligible for these deductions you must:
- be working from home to fulfill your employment duties (this should not just carrying out minimal tasks, such as occasionally checking emails or taking calls)
- incur additional running expenses as a result
- have records that show you incur these expenses
Here’s what you can typically claim:
- Energy Costs: This includes additional electricity or gas costs incurred for heating, cooling, and lighting due to work activities.
- Internet and Phone Expenses: Costs associated with home and mobile internet or data usage necessary for your work, as well as home and mobile phone expenses.
- Office Supplies: Expenditures on stationery and other office supplies that are used directly for work purposes.
- Depreciation of Assets: The decline in value of office furniture (like desks and chairs) and equipment (such as computers, laptops, and software) used for work.
If your home office is a dedicated workspace that isn’t used for any private purposes, you might also be eligible to claim:
- Occupancy Expenses: These include costs like mortgage interest or rent.
- Cleaning Expenses: Costs associated with cleaning the home office area.
It’s important to keep detailed records and receipts to substantiate these claims, ensuring you can accurately demonstrate the portion of expenses related to your employment activities.
What Can I Claim for a Home-Based Business?
If your business operates from your home or is based there, you are eligible to claim a portion of various expenses related to your business activities. These deductible expenses include:
- Mortgage Interest: You can claim a portion of the interest on your home loan that corresponds to the area used for business purposes.
- Electricity: The additional cost of electricity incurred due to business activities can be claimed.
Capital Gains Tax (CGT) Consideration
Be aware that if you decide to sell your home, you might need to pay capital gains tax (CGT) on the portion of your home that was used for business purposes. This must be reported in your tax return.
For more detailed guidelines, visit the ATO’s guide to home-based business deductions.
Vehicle and Travel Deductions
Using Your Vehicle for Business:
If your vehicle plays a part in your business, you can deduct costs related to fuel, maintenance, and depreciation.
Types of Business Travel Expenses
Common deductible expenses include:
- Fuel, Tolls, and Parking: Costs for operating and parking your vehicle.
- Transportation Fares: Airline, bus, train, tram, taxi, or ride-sourcing fares.
- Car Hire: Fees for hiring a car for business purposes.
- Accommodation and Meals: Costs if you need to stay overnight for business.
Remember, you cannot claim deductions for travel expenses incurred before you start your business.
Record Keeping for Business Travel Deductions
When it comes to business travel expenses, keeping your records accurate and separate from personal expenses is crucial. Here’s what you need to know:
- Separate Business from Personal: Only the business portion of your travel expenses is deductible. Keep clear records distinguishing business expenses from personal ones.
- Record Keeping: Maintain records for five years to substantiate your expenses.
- Travel Diary: If you travel for six or more consecutive nights, maintaining a travel diary may be necessary.
- Motor Vehicle Expenses: For more details on expenses related to business motor vehicles and travel, refer to the ATO’s factsheet on< Motor vehicle expenses.
Claiming Deductions for Business Travel
You can claim travel expenses related to your business for trips taken within a day, overnight, or longer. Ensure you have records proving that the expenses were for business purposes. Here are some guidelines:
- Private Costs Excluded: You cannot claim costs related to private activities, leisure, holidays added onto business trips, or family members’ travel expenses.
- Overnight Travel: To claim these expenses, you must have a permanent home elsewhere, and your business must necessitate the overnight stay. Relocation or living away from home expenses are not deductible.
- Company and Private Travel: If your company covers the private portion of your travel, there may be tax implications for you and your company regarding Division 7A and Fringe Benefits Tax (FBT).
Deductions for Employee Travel Expenses
Regardless of your business structure, you can claim travel expenses for employees if the business incurs these expenses by paying directly or reimbursing the employee. Keep the following in mind:
- Fringe Benefits Tax (FBT): Your business may be subject to FBT if it pays or reimburses employee travel expenses or private activities. Certain exemptions and concessions may reduce FBT liability. For more information, refer to Exemptions and concessions.
- Travel Allowances: Different considerations apply if you provide travel allowances or living-away-from-home allowances to employees. For more details, see FBT and Travel allowances.
For more information, check the ATO’s travel expenses guide.
Personal Deductions
Superannuation Contributions:
Paying into your super isn’t just good for your retirement, it’s also an effective tax-effective strategy. These contributions are amounts you voluntarily add to your super fund.
- Concessional Contributions: If you claim a tax deduction for your contributions, they are treated as concessional contributions, coming from your pre-tax income and taxed at 15% within the fund.
- Non-Concessional Contributions: If you do not claim a tax deduction, they are non-concessional contributions, coming from your after-tax income or savings, and are not taxed further.
Personal contributions:
- Are in addition to any compulsory super contributions made by your employer.
- Do not include contributions made through a salary-sacrifice arrangement.
- Are subject to the contribution caps for both concessional and non-concessional contributions.
Claiming Deductions for Personal Super Contributions
To claim a deduction for your personal super contributions:
- Notify Your Super Fund: Submit a notice in the approved form to your super fund.
- Get Acknowledgement: Obtain an acknowledgment from the fund.
Your claimed contributions will count towards your concessional contributions cap.
Important Considerations
Before deciding to claim a deduction for super contributions, consider these factors:
- Concessional Contributions Cap<: Ensure you do not exceed your concessional contributions cap, which is taxed at a concessional rate of 15%.
- Division 293 Tax: Be aware if your combined income and concessional contributions exceed $250,000, you may be subject to Division 293 tax.
- Contribution Splitting: Decide if you want to split contributions with your spouse.
- Super Co-Contribution Eligibility: Understand how claiming deductions might affect your eligibility for super co-contributions.
If you exceed your contribution caps, you will have to pay extra tax. Also, any excess concessional contributions left in your super will be counted towards your non-concessional contributions cap.
Note: Deductions can only be claimed in whole dollars. If your contribution includes cents, the remaining amount will be treated as a non-concessional contribution and count towards the relevant cap.
Reporting Your Contributions
Deductible personal contributions are counted towards your reportable super contributions. Always consider the broader impact on your overall tax and superannuation strategy when making additional personal contributions.
Learn more about deductions around personal super contributions here.
Self-Education Deductions:
If you’re studying something that’s directly related to your current job or business, here’s what you can deduct:
- Tuition Fees: But only if the courses are necessary for your current work, these courses or training events can be:
- Courses at an educational institution
- Courses provided by a profession or industry organisation
- Work-related conferences or seminars
- Self-paced learning and study tours (Australia or overseas)
- Study Materials: Any essential texts and materials needed to complete this training.
- Travel Expenses: Costs incurred when your self-education requires you to travel, and be away from home overnight (for one or many nights).
Check out the ATO’s guide to self-education expenses to get the full scoop.
Gifts & Donations
Charitable Contributions:
Donations to registered charities (under ‘deductible gift recipient’) are deductible when they exceed $2. Always make sure to obtain and keep receipts to back up your claims.
Read ATO’s guide on tax deductible gifts and donations for more information.
Accountant-filed Tax Return
If you use an accountant to lodge your tax return (whether as an individual or for business) the fees they charge will also be tax deductible for the following financial year.
To make the most of your tax deductions, ODIN recommends maintaining thorough records and staying knowledgeable about tax laws.
Regular consultations with tax professionals and financial advisors will help you keep your claims accurate and current. By effectively using these deductions, you can lower your taxable income and secure significant financial benefits.
Please Read: What You Should Know
This information is provided as a general guide and does not consider your specific objectives, financial situation, or needs. Taxation information is based on current laws, which may change. It is advisable to seek independent, professional tax advice before making any decisions based on this content.
Tax laws are subject to updates. For the most current information, refer to the ATO website or consult with your accountant or financial advisor.
The Australian financial year concludes on 30 June. Tax returns for the previous year can be lodged from 1 July to 31 October. If you use a registered tax agent, you may have an extended deadline beyond 31 October.
