All sole traders must be aware of exactly what you can claim as it will help you ward off a large tax bill when tax time looms.
In this article, we provide an overview of what you can claim as a sole trader, including unusual claims you might not be aware of and industry-specific tax deductions.
Allowable Deductions for Sole Traders
If your expenses relate directly to running your business and earning assessable income, you can claim them in your personal tax return.
According to the Australian Taxation Office, you can generally claim the following operating expenses in the year you incur them:
• Bad Debts
• Home Office Expenses
• Bank Charges
• Business Motor Vehicle Expenses
• Business Travel
• Education and Training
• Professional Memberships
• Telephone Bills
• Tax Preparation Costs
Typically, depreciation on capital expenses, which are expenses that have a longer life, is claimed over several years. Examples include:
• Electrical Tools
• Motor Vehicles
• Plants and Equipment
If an expense is for both business and private use, you can only claim the business portion. As a sole trader, you cannot claim deductions for private or domestic expenses, entertainment, fines, nor expenses relating to income that is not taxable, such as money earned from a hobby.
Additional and Unusual Claims for Sole Traders
Did you know you can prepay your expenses, for a period of less than a year, and attract a tax deduction? As a sole trader, you can prepay subscriptions, certain business travel expenses, training events and business asset repairs, for example.
Industry-specific tax deductions
The industry you work in affects your tax deductions.
For example, mechanics can claim the cost of using their car to travel between home and work if they’re transporting bulky tools and there is no secure storage on site.
Travel agents may claim expenses associated with attending conferences and industry promotions, including passport fees and travel insurance.
LDB Group – January 2017
This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.