How to Maximise Business Tax Deductions in Australia

September 2, 2023
6
minutes to read
by
Justin Bohlmann
Contents

Maximising business tax deductions in Australia could be easier than you think. Understanding and optimising tax deductions can be the difference between a hefty tax bill and significant savings. The Australian tax system, while comprehensive, offers numerous opportunities for deductions, especially if you know where to look. This in-depth guide sheds light on these areas, helping you navigate the taxation maze with ease.

How To Keep Tax Records to Maximise Tax Deductions

Why is it important to keep tax records?

Every dollar counts, especially when it comes to taxes. Keeping thorough tax records helps with:

  • Proof of Deductions:¬†The ATO can ask for proof of your deductions at any time - even years after filing. In the event of an audit or review by the Australian Taxation Office (ATO), these records are your primary defence. They substantiate your claims, ensuring you're not left scrambling for proof.
  • Streamlining Tax Returns:¬†With organized records, the daunting task of filing your tax returns becomes a straightforward process, ensuring you claim every possible deduction.
  • Financial Health Assessment:¬†A systematic record provides clarity on your financial position, allowing for better budgeting, forecasting, and financial decision-making.
  • Avoiding Penalties:¬†Keeping accurate and complete records is required by law. Discrepancies in tax filings due to poor records can lead to fines, interest, and a potential audit by the ATO.

Thriday makes it super easy to keep all of your financial records organised with the following features

  • Scan, send and save receipts to Thriday - This not only means you can keep track of them all and have them on-hand in case of an audit but it also automates the reconciliation process, giving you back your Sunday nights.
  • Attach documents to manual balances - To claim a deduction on a cash payment you still need a record of the receipt, Thriday enables manual creation of the transaction and the ability to attach the receipt to that same transaction. So even if it's cash you're still maximising your deductions

What records do you need to keep for tax as a small business?

Tax records for small businesses in Australia encompass more than just receipts. To ensure you meet the ATO's requirements:

  • Business Payment Summaries:¬†These summaries are vital for verifying the income you've received, especially if you have other sources of income apart from your small business.
  • ‚ÄćFinancial Statements:¬†Documents from banks and financial institutions are crucial. They provide insight into interest earned, dividends, and other forms of income specific to your business operations.
  • ‚ÄćEquipment or Asset Transactions:¬†Ensure you have receipts or invoices for business asset purchases and sales. These will be necessary when calculating depreciation or capital gains tax for your small business.‚Äć
  • Expense Documentation:¬†Retain all receipts related to business expenses. This could range from office supplies to work-related travel, helping ensure you claim all available deductions.‚Äć
  • Investment Records:¬†If your business has invested in shares or property, details of these transactions are required. They assist in determining capital gains or losses for your business.‚Äć
  • Gifts or Donations:¬†If your business has made donations to approved charities or organisations, you may be eligible for deductions. Hence, it's essential to keep a record.‚Äć
  • Medical Bills:¬†While typically more relevant for individual tax returns, if there are specific medical expenses related to your business or employees, you should retain these records.

How long should you keep tax records in Australia?

The ATO is quite clear on this: five years from when you lodge your tax return. However, in cases where amendments are made to the return or other discrepancies occur, this period might extend. For complex tax affairs, err on the side of caution and keep records for even longer.

Thriday will store all of the tax records you save to it until you tell us not to.

How to keep tax records organised

In today's digital age, organising has never been easier:

  • Digital Storage:¬†Convert physical documents into digital formats. Apps or scanners can quickly digitise, reducing clutter and making retrieval easier.
  • Categorisation:¬†Use folders or apps to categorise records by year, type, or any other criteria that simplifies retrieval.
  • Routine Checks:¬†Dedicate time, whether weekly or monthly, to update and review your records. This proactive approach helps in identifying and rectifying discrepancies early.
  • Cloud Backup:¬†Store digital records on the cloud, ensuring access from anywhere and safeguarding against data loss.

In Thriday your tax records are saved at the transaction level so it's super easy to find them if and when you need to.

The benefits of using a tax agent

While it's an added expense, a tax agent's benefits far outweigh the costs:

  • Expertise:¬†Tax laws are ever-evolving. Agents are updated on these changes, ensuring you leverage every possible deduction.
  • Efficiency:¬†They handle the heavy lifting, making tax filing a breeze.
  • Accuracy:¬†Their experience ensures minimal errors, reducing potential conflicts with the ATO.
  • Audit Support:¬†Should the ATO knock on your door, a tax agent provides invaluable support, guiding you through the process.

Thriday has partnered with POP Business a registered tax agent, if you ever need advice we can introduce you.

How To Keep Tax Receipts Organised

Thriday receipt scanning app
Thriday receipt scanning app

Why do you need to keep tax receipts organised?

Organising receipts isn't just for the tax season. It:

  • Ensures Full Deductions:¬†With every tax receipt accounted for, you miss no deductions.
  • Speeds Up Processes:¬†Be it tax filing or any financial review, having organised receipts speeds up the process.
  • Provides Peace of Mind:¬†Come tax season, you won't be scrambling. Knowing you're prepared reduces stress.

With Thriday's receipt scanning app your tax receipts are automatically saved and reconciled to the corresponding transaction. It's never been easier to stay organised compliant and as tax effective as possible.

Tips for keeping your tax receipts organised

A receipt lost is a deduction missed. Hence:

  • Immediate Storage:¬†Upon receiving a receipt, immediately store it in its designated place, whether a physical folder or a digital app.
  • Digital Apps:¬†Apps like Thriday can store your receipts digitally, automatically categorise transactions and even provide overall summaries of your expenses and cash flow.
  • Yearly Archiving:¬†Post-tax season, archive the year's receipts and start fresh for the new fiscal year.

How to store your tax receipts

Whether you're old school or tech-savvy:

  • Physical Storage:¬†Good old filing cabinets, binders, or folders still work wonders.
  • Digital Methods:¬†Scanning or photographing receipts ensures they're stored for posterity.
  • Cloud Platforms:¬†Online platforms like Dropbox or Google Drive provide added layers of security and accessibility.

With Thriday all of the receipts you save are stored and backed up in the cloud so you can screw up the original and throw it away, no more messy shoeboxes or folders full of faded paper receipts.

The best digital tools to keep your tax receipts organised

The digital era offers a myriad tools:

  • Thriday:¬†A versatile tool where you can photograph receipts and have them automatically categorised and stored, integrated with your bank account and all other financial administration needs.
  • Receipt Bank:¬†Tailored for receipt storage, it captures key info and even integrates with accounting software.
  • Expensify:¬†Perfect for business expenses, it's comprehensive and integrates with various financial tools.

How long to keep your tax receipts

Aligning with the ATO's guidelines for tax records, keep your receipts for a minimum of five years. This ensures you're covered in any eventuality.

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What are some common tax deductions in Australia?

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  • Work-related expenses:¬†Items like uniforms, tools, and even travel between work sites can be claimed.
  • ‚ÄćHome office expenses:¬†With the rise of remote work, portions of rent, electricity, and the internet can be deducted if a dedicated workspace is present.
  • Charitable contributions:¬†Donations to recognised charitable organisations are deductible, promoting a culture of giving.
  • Medical expenses:¬†Certain conditions and treatments qualify for deductions, lightening the burden of healthcare.
  • Investment overheads:¬†Costs associated with managing investments, such as consultancy fees, can be claimed.

If you're just curious about a specific item or items we recommend checking https://www.ato.gov.au/ but rest assured Thriday has many rules baked into the system to automate this process for incoming and outgoing transactions.

save receipts

What tax deductions can I claim without receipts?

The ATO understands that sometimes receipts get misplaced. Hence, for work-related expenses, claims up to $300 in total can be made without receipts. But remember, you must have incurred the expense, and it should be relevant to earning your income.

To easily avoid missing receipts in the future, apps like Thriday can be used to scan, classify and store receipts immediately.

What are pre-tax deductions and contributions?

Pre-tax deductions are those taken from your wage before the tax is applied. In the Australian context:

  • Superannuation Contributions:¬†These are specific amounts set aside into one's retirement fund or super fund.
  • Salary Sacrificed Benefits:¬†This pertains to specific items, such as cars or laptops, that an employee opts to receive in lieu of part of their salary.
  • Fringe Benefits:¬†Benefits given by employers that aren't in the form of cash, like the provision of a company car for personal journeys.

How can I keep track of my expenses for tax purposes?

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  • Regular Review:¬†Routinely reviewing bank and credit card statements aids in expense tracking and categorisation.
  • Dedicated Accounts:¬†Having a separate bank account for business or specific expenses ensures clarity.
  • Management apps:¬†Platforms like Thriday can use integrated bank accounts to automatically categorise and monitor expenses, providing a clear financial picture.

Are there any tax deductions specific to self-employed individuals in Australia?

Self-employed Australians have various operating expenses that they can claim as tax deductions. Here are some common business operating expenses for self-employed Australians:

  • Office expenses:¬†Ensuring your office functions smoothly is critical for business operations. Costs for necessary items like stationery, postage, and printing are deductible.
  • Rent and utilities:¬†A conducive workspace fosters productivity. Rent for your business premises, along with utilities such as electricity, water, and internet, are deductible expenses.
  • Marketing and advertising:¬†Creating awareness for your brand and services is vital for growth. Expenses incurred for website development, social media promotions, and business cards can be deducted.
  • Professional fees:¬†Expert advice can often be the difference between success and stagnation. Fees paid for accounting, legal, and bookkeeping services are deductible.
  • Insurance:¬†Insurance premiums for business-related insurance, such as public liability insurance, professional indemnity insurance, and workers' compensation insurance, are deductible.
  • Travel expenses:¬†Meeting clients or attending business-related events might require travel. Costs for airfare, car rentals, and accommodation for these purposes are deductible.
  • Depreciation:¬†Your business assets play a crucial role in your operations. Depreciation on items such as computers, vehicles, and other equipment is a deductible expense.
  • Superannuation:¬†Preparing for the future is just as important as addressing the present. Contributions made to superannuation funds are deductible.
  • Bank fees:¬†Efficient financial management is the backbone of any business. Fees associated with business bank accounts, credit cards, and loans can be deducted.
  • Training and education:¬†Investing in knowledge ensures you stay ahead in the industry. Expenses for courses, seminars, and conferences that align with your business are deductible.

It is important to keep accurate records of all business expenses to claim deductions on your tax return. By claiming these expenses, self-employed Australians can reduce their taxable income and potentially increase their tax refund.

Thriday customer: massage therapist

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Navigating the Australian tax landscape, with its myriad rules and exceptions, can be daunting. However, with diligent record-keeping, an understanding of deductions, and perhaps guidance from a tax professional, you can ensure that you're not paying a penny more than necessary. Every dollar saved in tax is a dollar earned. Make sure you earn yours!

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