Self-employment brings with it a great deal of freedom. However, it also means that there are a lot of details to take care of that you took for granted when you had an employer. One of the major headaches for business owners can be dealing with the ins and outs of taxation every year. It is always advisable to use the services of a professional accountant to limit the chances of a mistake being made and ensure you get all you are entitled to, but there are a few points you should be aware of yourself.
What you can claim in your home office
A small business can claim depreciation on almost everything in their home office, including the actual office itself. Many people aren’t comfortable claiming for things such as power, telephone and internet costs when they are used for both home and work situations, however a business is entitled to a portion back on utilities. A set number of cents per minute may sound like a miniscule amount, but if a person works full time from home full time then the amount starts to add up.
Your home office should be a designated area, not just the dining room table. It should be clearly demarcated from living areas, not the spare room or kids’ play area. A computer is an essential part of the home office, however if you don’t have a separate computer for work then it will be difficult to convince an auditor that it isn’t for personal use too. You must be careful about claiming for expenses if you can’t definitively prove them.
The purchases that you can claim
Anything you purchase for your business can be claimed as an expense. This includes computers that are solely for business use, software and peripherals, and any consumables like paper and discs. This extends to website development and hosting expenses, books, magazines, and anything you purchase to develop your business and perform its operations.
Being a small business owner who needs to travel is a dream come true for many people. It’s even better when you realise that your expenses are also tax deductible. Food, accommodation, airfares, cars, public transport and taxi fares are all claimable, however you need to keep a diary that details the time you spent working vs any time you were conducting personal affairs. This can include taking the family with you to another city or country and visiting the zoo or amusement park, or simply meeting friends for dinner.
Keep your finances separate
The key is to be smart and honest, and once again, only claim for that which you can provide evidence. Being a business owner isn’t a licence to pad out your tax return with personal expenses, but there are genuine expenses you can claim for. The ATO is vigilant and always on the look-out for irregularities in regards to taxes, which means it is vital to seek the assistance of a trained professional. Being audited is a grueling process and the more care you take with your deductions, the less likely you are to be subject to the inconvenience and stress.