If your turnover is less than two million dollars, you would be classed as a small business entity (SBE). This tax time, the ATO is making things easier for small businesses. Whether you use a registered tax agent or manage your own tax affairs, here are some tips to help you:
- If you are preparing your own tax return you must lodge by 31 October 2017.
- If you are using a registered tax agent they will have different lodgment dates. If you are using a tax agent for the first time or using a different tax agent you need to let them know until 31 October.
- If you have employees, make sure you lodge PAYG payment summary annual reports to the ATO by 14 August each year.
Include ALL your Income
- It is important to make sure you declare all your cash and online sales in your tax return.
- Your income may also include money you have earned from participating in the sharing economy e.g. renting out a room, a car parking space, the odd delivery or cleaning job for a fee or driving passengers for a fare. (For more information visit: The sharing economy and tax)
What Can I Deduct
The ATO wants small businesses to claim what they are entitled to – no more, no less. Make sure you keep accurate and complete records of all the assessable income and business deductions you claim. (For more info: Income and deductions for business)
- You can claim tax deductions for most costs you incur while running your business. You can generally claim operating expenses, such as office stationery and wages, in the year you incur them. However, you typically claim capital expenses, such as buildings, machinery, and equipment, over a longer period of time.
- Home office: If your home is also your place of business, you can claim income tax deductions for a portion of the costs of owning, maintaining and using your home for this purpose but you must have an area set aside exclusively for your business activities. If you just use facilities in your home to run your business, then you may be able to claim a portion of running costs such as business phone costs, a decline in value of furniture, cleaning, heating and cooling costs.
- Personal Services Income: Use the new tool to check if you may be earning personal services income if you are self-employed and paid mainly for your personal efforts, skills or expertise. It will also help you to work out whether or not special tax rules apply. If the special tax rules apply to your personal services income they can affect the deductions you can claim and how you report your income. (For more information visit: Personal services income tool).
What Can’t I Deduct
- You cannot claim deductions for private or domestic expenses. You should be aware that entertainment, fines and some other expenses are also specifically excluded from business-related deductions.
The ATO knows that working out depreciation deductions can be a little tricky. That’s why they created the simplified depreciation rules for small business with an aggregated turnover of less than $2 million:
- Instant asset write-off: You can immediately deduct assets bought for your small business, which cost less than $20,000 in the year that you buy and use them, or install them ready for use. The increased instant asset write-off threshold of $20,000 applies from 7.30pm 12 May 2015 to 30 June 2017.
- Remember that if the balance of your pool for depreciating assets is less than $20,000, before applying any other depreciation deduction, you will need to immediately deduct the full amount in your tax return. (For more info: Simplified depreciation for small business)
Tax Return Easy Done with myTax
MyTax is no longer just for individuals. In 2016, sole traders who prepare their own tax return will be able to lodge online using myTax. It also gives sole traders access to new online tools to assist with their tax return.
- MyTax has replaced e-tax and is a quick, easy, safe and secure way to prepare and lodge your own tax return online.
- MyTax has been upgraded to include business and professional items sections for sole traders and distributions from a partnership or trust To use myTax you will need a myGov account. If you use a tax or BAS agent check with them before creating a myGov account.
If you need to complete a partnership, trust or company tax return these will need to be lodged through a tax agent or on paper.
New MyTax Tools
- If you’re a sole trader planning to use myTax, you will find a number of inbuilt tools to help you save time and avoid mistakes.
- The new Depreciation and capital allowance tool will help you work out the deductible amount for your depreciating assets. It will also reduce your search time when determining the effective life of an asset.
- The new Capital gains tax record keeping tool can help you calculate your capital gains events. Capital gains events might include the sale of a rental property, vacant land, holiday home, real estate or shares in a company or units in a unit trust.
ATO support is easily accessible via the free after-hours call back or web chat services (for more info visit: Supporting your small business). You can also keep up-to-date with the latest tax and super news by subscribing to the ATO’s Small Business Newsroom. Regular and reliable information will be delivered directly to your inbox.