The first step is to get your Australian Business Number (ABN) to start up your sole trader business and if you are expecting to make over $75,000 per year. You will need to register for Good and Service Tax (GST) as well. You can choose to pay monthly, quarterly or yearly. As a sole trader, you are required to keep records for your income and expenses which explains all the transactions either in writing or electronic and it need to be kept for a minimum of five years. We have listed down some examples of expenses that you have incurred as a business that might be claimed as Tax Deductions.
Working from home
You can claim costs a running cost of heating, cooling, and lighting either based on the proportion of the floor area of your business area or a fixed rate of 52 cents per hour before COVID and 80 cents per hour after COVID.
To claim a proportion of running costs, you have to set aside an area of your house for your business uses and it has to have the character of a ‘place of business. You can claim a portion of your occupancy cost of mortgage interest, rent, internet, land taxes, council rate, and contents insurance based on the floor area of your business.
If you use your phone to contact clients or provide your service, you can claim a portion of the time and data of your phone bill and internet bill that you used for work.
Tools and Equipment
You can claim any work-related tools and equipment and insurance on them as follows:
Phone purchased for work use
Laptop and laptop accessories
Computer and tablet
Camera and camera accessories, if applicable.
Software that you have subscribed to and purchased for your services can be claimed fully as an expense. These are quite expensive, so remember to keep the invoices for record purposes! Such software includes Adobe Creative Cloud, MYOB, etc.
Motor vehicle expenses
You can claim the Motor vehicle expenses. if you need to travel from site to site or to pick up supplies and materials. Alternatively, if your home is a primary place to work then you can claim travel from your house to and for work required purposes.
There are two options to calculate this expense:
Cent per KM method: You can claim up to 5,000 business km for 68 cents/km in your 2019-2020 tax return.
Logbook method: You can claim the percentage of most car expenses. However, you will need an official vehicle logbook stating for a 12-week period of the beginning and ending odometer reading. This will be used as a representation of your travel throughout the whole year and determine the business use percentage of motor vehicle expenses that you can claim.
Work-related clothing expenses
Work-specific or protective clothing can be deductible. You can claim laundry expenses for it as well, for up to $150 without receipts. Protective footwear, goggles and sunscreen are also deductible!
License and Registration Fees
If you are required to have specific checks done for your line of work, i.e. Working with Children’s Check, Police Clearance, etc. or have to be a member of an organization to practice your trade, these are all deductible expenses.
Marketing and Advertisement Fee
If you incur costs in advertising your services or pay for marketing costs, these are also tax-deductible.
Any accounting fees (including using a Tax Agent) are deductible. So, why would you do it yourself?
Any insurance expenses that you incur for your business such as public liability or income protection are deductible. Personal insurance such as TPD and Life insurance are not deductible.
Any donations made to eligible charities of more than $2 are deductible.
Any fees that you incur to maintain your business account or for payment gateways are tax-deductible.