Common tax deductions for small business 
Are you claiming all the business tax deductions that you are entitled to? 
There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides. ​​

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses. 

• Employment expenses include salary and wages, fringe benefits, superannuation and training costs. 
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software. 
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately. 
• Repairs and maintenance to assets and business premises. 

Expenses must relate to the running of the business and providing the goods or services that your business offers. 

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment. 
There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to. 
What’s on the ATO’s radar? 
This year the ATO will be taking a closer look at record keeping, work related expenses, rental property income and deductions and cryptocurrency transactions. 

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years. 

• Keep all records relating to employees, contractors and payroll for at least seven years. 
• If your business is a company, keep all records for at least seven years, including director meeting minutes. 

Other common tax return issues 

• Work-related travel expenses – travel fares, accommodation & meals. The travel should be directly related to income producing activities and you need records to verify the claims. 
• Motor vehicle expenses – keep records for fuel, repairs & servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel. 

• Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are often scrutinised. 
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The payment date is always due on the 28th of the mont following the end of the applicable quarter. The ATO will examine your Single Touch Payroll records including superannuation payments. There are severe penalties for late payment of superannuation. 
• Current temporary tax depreciation incentives - There are currently three temporary tax depreciation incentives available to eligible businesses: 

• Temporary full expensing - for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, on 6 October 2020 to 30 June 2023. 
• Increased instant asset write-off - if the asset was purchased by 31 December 2020, and first used or installed ready for use before 30 June 2021. The threshold remains at $150,000. 

• Backing business investment - accelerated depreciation for some assets in the 2020 and 2021 financial years. 

Maximise Your Business Deductions 
We can check your business’s eligibility for concessions, offsets, employer incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to! 
It’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner. Talk to us to see what applies for your business. ​

Do you know which business metrics and key performance indicators (KPIs) to implement and track? We can help you set up a custom KPI dashboard to manage the future path of your business, including numerical, financial and non-financial data. Michele Rawlins, part of our team at Preston Corporate, can help you create your own KPI management dashboard.  
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Once you begin trading, you’re faced with the challenge of successfully managing the course of your business and making sure it’s a profitable enterprise. 

It’s easier to manage sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you're performing against your targets – so you can take action to improve performance, sales, growth and profitability. 

But which KPIs should you be tracking? 

Sales and conversion rates 
An obvious metric to track is the number of sales you’re making each month. Hopefully you have set a target for these sales in your business plan, so it’s important to record each sale and see how the business is performing over the current 12 months compared to the last 12 months of trading. 
It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns and is this engagement leading to interest in your products and/or services. 
The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods. 
Sales revenue and other revenues 
When customers buy your goods, this generates income (or revenue) for the business. Ultimately, no business can succeed unless it’s generating enough revenue to keep the wheels turning, so tracking your sales revenue is a vital measure of your financial health. Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets and forecast how much working capital you’ll have at a future point in time. This will help you see if there’s enough cash in the bank to fund your current projects and growth plans. 
Cashflow and ongoing cash position 
Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT of the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position. 
Ideally, you want the business to be in a positive cashflow position (with more cash coming in vs. going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed. 
Debtor days and aged debt 
When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt. 
Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business. 
Gross profit margin 
Generating a profit is crucial to the continued success of any business and having metrics to measure your profitability is an important part of managing your finances. 
One common way to do this is to track your gross profit margin. This shows the amount of profit made BEFORE you deduct things like overheads. It’s important to show, as a percentage, the cost of goods sold (COGS) so that you can monitor the changes. The formula for calculating your gross profit margin looks like this: 
Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100 

• Deduct your COGS value from your gross revenue to find your gross profit. 
• Divide this gross profit by your revenue. 
• Multiply the resulting number by 100 to get a percentage. 

This is your gross profit margin as a percentage of gross profit. A percentage of 50% to 70% is healthy but aim for as big a margin as possible. 

By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your business – and that’s invaluable as your business journey unfolds. 

If you’re at the early stages of planning out your business idea, please do get in touch with us. We’ll help you set up a custom KPI dashboard to manage the future path of your business and also offer training in Xero accounting software to keep you on the right track. 

Are you making the most of your investment property? Getting the income and allowable tax deductions right can be a confusing task. We’ll help explain the details below so that you’re claiming all you can.  ​

Income to declare 
All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make preparation of the tax return more efficient. 

• Rent received – This must be included whether paid directly to you or through an agent/online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance. 

• Rental bonds returned – for example, if the tenant caused damage or defaulted on rent payment and you received the bond as compensation. 
• Insurance payouts – insurance received for your investment property 
• Expenses reimbursed by the tenant – for example, if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water usage. 
• Extra fees received – for example, letting or booking fees. 
• Government rebates – for example, rebates for installation of solar utilities. 

You will need to keep statements or recipient created tax invoices from agents or management platforms as well as documents for all other payments received. 

Tax deductions 
Deductible expenses are different for residential and commercial properties. Not all expenses related to owning a property are allowable as deductions, so it’s important to check what you can claim. 

Expenses you may be able to claim this year 

• Advertising for tenants 

• Body corporate/strata management fees 
• Council rates 
• Water supply charges 
• Land tax 
• Cleaning, gardening, pest control and property repairs & maintenance 

• Insurance 
• Agent management fees and other charges 
• Some legal expenses 
• Loan interest paid 

Other expenses 
There are some expenses which need to be claimed over a longer period of several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works. 
Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums. 
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Get help to simplify your property records 
Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing. This year for many owners there will be insurance claims because of the flooding in Australia.
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We’d love to help ensure you are claiming the right deductions to make the most out of your investment property this year and beyond. Contact us to book a time to discuss your tax return and investment deductions.