Planning for Success

Tax Time Essentials: Learn how to navigate tax basics as a business owner

Chances are you may have experienced some changes that will affect your small business. COVID-19 has impacted us all to varying degrees and has no doubt created more stress in our lives.

Understanding what your tax obligations are is one way you can alleviate some of the stress you may be feeling. Read on to learn about some of your tax time essentials.

1. Home-based business expenses

If you are a sole trader or in a partnership, you can claim deductions on a lot of home-based expenses if you operate your business from home. These can include:

– Rent

– Electricity costs

– Phone and phone bill

– Plus many other expenses (ask your accountant)

If you run your business from home and  your work area is also shared with your living area, this will affect what you can claim.

Remember to keep the records of all your expenses for at least five years. For a full list of deductions and information, visit the ATO website here.

2. Motor vehicle expense

The ‘Cents per Kilometre’ method or the ‘Logbook’ method are the two ways to claim motor vehicle expenses. You can claim travel expenses of up to 5000 km at a rate of 72c/km from July 1, 2020.

If you want to claim travel expenses then you must be able to show a calendar, diary or logbook that documents your travel time.

Remember, the only motor vehicle expenses you can claim are the kilometres you use exclusively for business-related travel. You cannot claim personal travel expenses.

The types of expenses you can claim are:

  • Fuel
  • Oil
  • Services
  • Repairs
  • Interest on a motor vehicle loan
  • Lease payments
  • Insurance
  • Registration
  • Depreciation of the vehicle.

For more information, visit the ATO website here.

3. Travel expenses

Similar to motor vehicle expenses, you can also claim travel expenses.

These expenses can include:

  • Airline tickets
  • Train tickets
  • Bus tickets
  • Tram tickets
  • Taxi expenses
  • It may also include accommodation and meal expenses

Again, all expenses must be only business-related (not personal) and you must keep exact records that will prove your expenses for five years.

For more information about travel expenses, visit this page on the ATO website.

4. Pausing or permanently closing your business due to COVID-19

There are a few things you will need to consider if you are either pausing or permanently closing your business.

If you are permanently closing your business, you will need to prepare your final activity statements and income tax returns before you cancel your ABN.

Then you must cancel your ABN within 28 days of closing your business.

If you are registered for GST, you must also cancel your GST registration within 21 days of ceasing business activity.

To see all the obligations of pausing or permanently closing your business, go to this page on the ATO website.

COVID-19 has brought about a lot of changes for many people in small businesses and so it’s important you stay up to speed on what you need to do. This will give you peace of mind, and help you avoid complications further down the line.

Do you need help with your business tax?

Vibrant Business will help take care of all of your business financial needs. From tax and accounting to bookkeeping, coaching, and mentoring, we can help you plan and structure your business to achieve your milestones. This means less stress for you as a business owner.

For more information on these services, please contact us or book a time to chat here.

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