The Australian Taxation Office (ATO) is reminding small businesses about three things to be aware of ahead of the end of financial year.
“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,” ATO Assistant Commissioner Emma Tobias said.
Firstly, the ATO are reiterating that boosts are available for small businesses investing in skills and training or digital operations such as cloud-computing, e-invoicing or cyber security technologies. Small businesses will receive a bonus 20 per cent tax deduction for eligible expenses in their tax returns.
“For every $100 spent, you’ll get a $120 tax deduction, but there are caps on the total amount that can be claimed,” Tobias explained. “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.”
Any item to be purchased to avail of this boost must be first used or be installed ready for use by 30 June 2023 in order to be eligible. The small business skills and training boost allows businesses to claim an additional 20 per cent tax deduction to train new and existing employees between 29 March 2022 and 30 June 2024. Training must be through a registered external training provider in Australia.
The ATO are also keen to stress that temporary full expensing (TFE) is set to end on 30 June 2023. TFE allows for an immediate deduction for assets, rather than claiming the depreciation over a number of years.
Until the deadline, 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
“Even if you’ve paid a deposit or received an invoice, the asset must be installed ready to use by 30 June 2023,” Tobias said. “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.”
Finally, the ATO are reminding SME owners that business-from-home deductions and car expense deductions have changed for this tax period. These changes consist of the following:
- The new cents per kilometre rate is 78 cents for 2022-23, but small-business owners are reminded to keep written evidence to show how they worked out the work-related kilometres. This 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, the business structure can affect the method used and the expenses claimed, especially if the business is a company or trust.
“If you are claiming car or working from home deductions, make sure to keep good records,” Tobias said. “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.
