What is a business deduction?
A business deduction is an expense you’ve incurred for your business and are allowed to claim on your tax return.
Deductions are subtracted from your assessable income to work out your taxable income. Your taxable income is the amount that you pay tax on.
Most of the money you spend in running a business is tax deductible.
There are 3 golden rules when claiming business tax deductions.
- The expense must have been for your business, not for private use.
- If the expense is for a mix of business and private use, you can only claim the portion that is used for your business. Separating out the business portion and private portion is called apportioning.
- You must have records to prove your expenses.
There is no limit on the amount that you can claim each year, provided the expenses were incurred when you were earning assessable business income. You need receipts or other documents to substantiate the expenditure.
If you claim more than you’re allowed to and you don’t have records to back up your claims you may be required to pay a shortfall interest charge, along with any benefit you received.
