What Is A Tax Write Off And How Does It Work? – Part 2
Working professionals and business owners have probably heard of tax deductions at some point in their lives. While they may be familiar with the concept, many of them still don’t have a complete grasp of how tax write-offs work and how they can significantly impact their business. Here’s the continuation of our guide on tax write-offs and why you should pay attention to them.
Different Types of Deductions
Previously, we’ve talked about how tax write-offs can potentially reduce your taxable income and, in turn, reduce whatever tax you have to pay the Australian tax authorities. Now, it’s essential to understand that very specific types of items in your tax return can be considered a deduction. Let’s enumerate them all.
Vehicle and Travel Expenses
Many businesses have vehicle and travel expenses regardless of what industry they operate in. If you want to claim this as a write-off, it’s important to keep a complete record of all your transportation expenses. If you own a personal vehicle and you use it for work like transporting supplies, goods, etc., then you are entitled to claim it is a work-related expense. However, you cannot claim the cost of regular trips between your home and work because it’s already considered a personal expense.
Work-Related Clothing and Laundry Expenses
Does your business require you to wear a suit or a uniform that showcases your company’s colours and logos? If that’s the case, then this can be considered a write-off since it’s a cost incurred to serve your business operations. However, you need to conform to your company’s dress policy if you want to claim this as a write-off.
Clothing can only be claimed if it’s specific to your business or occupation. Let’s say you’re in the food business, then aprons, chef’s pants, and uniforms fall under this category. If you’re in the manufacturing industry and you require a specific type of clothing and footwear to protect yourself from injury, then that can also be considered a valid deduction.
Income Protection Insurance
Part of managing a business is protecting it, and one of the most effective tools for protection is getting insurance for your business. Insurance premiums that you take out against the loss of income can be included in your deductions. However, make sure that you do not incorporate life insurance or critical care insurance with this since they are not considered eligible for deduction. The same goes for policies paid for out of your superannuation contributions.
Working From Home
In a post-pandemic era, working from home suddenly became a normal part of many companies and businesses. Interestingly, expenses incurred while you’re working from home can be declared as a deduction. Given that you carry out at least part of your business activities at your home. It’s recommended that you set aside a home office that’s dedicated to all your work activities. Working from home means you are entitled to computer expenses, phone use, or any other electronic devices as long as you use them for your business activities.
Tax write-offs can be a tricky and complicated process to discuss. But it’s worth looking into and learning about since you can benefit greatly from being meticulous about your tax deductions. Just remember to claim only those expenses that are eligible to claim and that you have accurate records of everything.
New Wave Accounting is your partner when it comes to growing your business and maximising your profits. We take a holistic approach to help you understand how your finances and your taxes work. Our team of bookkeepers and accountants in Gold Coast will walk you through our three-step growth system to help you bring your business to the next level. Contact us today to get started!