Small Business Tax Breaks and Deductions

The tax benefits for small businesses are constantly changing. Here are some of the things to consider when you’re completing your business tax return.

Can you claim a small business instant asset write-off?

In the past, deductions for capital assets such as machinery or vehicles were based how much their value fell over time. Then, in the 2015/16 Federal Budget, the government introduced an Instant Asset Write Off scheme for small businesses.

This allowed small business owners to deduct the full cost of eligible assets up to $20,000. The option proved so popular that the cost limit increased over time. And, as the small business asset write-off also supports business investment and economic growth, it seems likely that the Government will leave it in place.

When claiming the small business instant-asset write-off, you’ll need to check the amount you’re allowed, when you have to make the purchase, and when the equipment needs to be used or installed. You may also be able to take advantage of the write-off if you finance your purchase with a business loan.

Has your company tax rate changed?

Tax rates are liable to change and the calculations can be quite complex. It’s a good idea to discuss this with your accountant.

Are there any new small business tax deductions?

Allowable tax deductions change from time to time and, in some cases, the changes can be quite substantial.  For example, to help businesses where employees were forced to work from home by COVID-19, the Government introduced claims for extra home-based business expenses. Anyone left with unsold and unsellable stock as a result of the pandemic or bushfires could also claim a tax deduction on the losses. So it always pays to check for new opportunities to claim, particularly if there has been a major impact on your business that was beyond your control.

Can you claim for business loans and bad debts?

You may be able to claim any fees and interest charges associated with a business loan as a small business tax deduction. You may also be able to claim for unpaid invoices if the outstanding debts were included in your assessable income in the current or previous financial year, and you write them off before June 30.

Are you entitled to a small business income tax offset?

The small business tax offset, also known as the unincorporated small business tax discount, has been reducing the tax paid by some small businesses by as much as $1,000 each year. It was introduced for sole trader or people who have a share of net small business income from a partnership or trust. You’ll find more information on the ATO website about small business income tax offset, opens in new window.

Other tax breaks for small businesses

As a small business owner, you may have access to a range of tax concessions related to income tax, capital gains tax, GST, PAYG and fringe benefits tax.

The ATO website is updated every year with the latest tax information, opens in new window. It’s also vital that you discuss your individual situation with a professional, so you don’t miss out on possible savings or claim deductions for things you’re not eligible for.