With tax time just around the corner, the Australian Taxation Office (ATO) is reminding small businesses about three things to be aware of ahead of the end of financial year:
- the new small business boost is now available
- temporary full expensing ends 30 June 2023
- deduction rate changes: running a business from home and car expense rates have changed.
ATO Assistant Commissioner Emma Tobias said, 'With only a few days left in the financial year, now is the time to talk to your tax professional if you think these things may be relevant for your business.'
1. Small business boosts now available
The boosts are available for small businesses investing in digital operations, or skills and training - for example, new equipment like technology, cloud-computing, eInvoicing or cyber security.
'Small businesses will receive a bonus 20% tax deduction for eligible expenses in their tax return, so for every $100 spent, you'll get a $120 tax deduction - but there are caps on the total amount that can be claimed,' Ms Tobias said.
'If you're a small business who invested in technology or digital operations between 29 March 2022 and 30 June 2023, then this boost is for you.
'It's important to remember, any item you purchase must be first used or installed ready for use by 30 June 2023 in order to be eligible,' Ms Tobias said.
Likewise, the Small business skills and training boost allows businesses to claim an additional 20% tax deduction to train new and existing employees between 29 March 2022 and 30 June 2024.
The training must be through a registered external training provider in Australia.
2. Temporary full expensing (TFE) ending 30 June 2023
TFE ends 30 June 2023.
Small businesses can still claim an immediate deduction for the cost of eligible assets first used or installed ready for use by 30 June 2023 in this year's tax returns.
However, the end of TFE on 30 June 2023 means that the cost of assets that are not already being used or installed ready to use by 30 June 2023 are not eligible for an immediate deduction under TFE in small business tax returns this year.
TFE supports small businesses making capital purchases by allowing an immediate deduction for assets, rather than claiming the depreciation over a number of years.
'Even if you've paid a deposit or received an invoice, the asset must be installed ready to use by 30 June 2023. If the asset is not installed ready for use by the deadline, you may still be able to claim deductions under the general or simplified depreciation rules,' Ms Tobias said.
3. Deduction rate changes
Both the running a business from home deductions and car expense deductions have changed for this tax time.
The key change a small business claiming car expenses needs to know is:
The new cents per kilometre rate is 78 cents for 2022-23 but remember to keep written evidence to show how you worked out the work-related kilometres. This is method is available to sole traders and partnerships.
The car limit has increased to $64,741 for the 2022-23 income year.
The working from home deduction methods have also changed for this year. Small businesses can choose one of two methods to claim working from home deductions: either the actual cost or fixed rate method. Only the fixed rate method is changing. However, your business structure can affect the method you can use and the expenses you can claim, especially if your business is a company or trust.
Ms Tobias said, 'If you are claiming car or working from home deductions, make sure to keep good records. This will give you more flexibility to choose the approach that gives you the best deduction at tax time.'
The ATO recommends small businesses seek advice from a registered tax professional or read about the changes on the ATO website before making investment decisions.
