It’s coming near the end of financial year, so while the thing on your mind about tax is the End of Year Sales, this time can also be important for your tax strategy.

Your tax return is commonly more complex when you have your own business as a sole trader rather than if you received wages or salary from your employer. However there can be greater scope to trim your tax payable.

So here are some general tips for a sole trader based at home. The ATO have a list of Common Business Deductions, but if you wish to know more, please don’t hesitate to contact us for an appointment.

1. Deduction for your home office

If your home is your place of business and you have an area set aside exclusively for business activities, you may be able to claim both running and occupancy expenses. If you carry on your business elsewhere and also do some work at home, you cannot claim occupancy expenses even if you have a home work area set aside.

1. occupancy expenses includes: rent, mortgage interest, rates, land taxes and house insurance premiums

2. running expenses include: phone rental and business calls, internet fees, depreciation of office furniture and equipment and any additional heating, cooling, lighting and cleaning expenses.

You can keep a diary to work out how much of your running expenses relate to working at home. All you have to do to support your claims is keep a diary for a representative period of about four weeks each income year. Alternatively, for home work area expenses, such as heating, cooling, lighting and depreciation of furniture, you can claim a fixed rate, instead of keeping details of actual expenses.

You can download this publication in Portable Document Format (PDF) – download Home-based business.

2. Travel expenses

Did you attend a conference this year? Do you travel to meet a client? If so, you can deduct these expenses such as transportation costs (airfare tickets, train tickets, taxis, airport parking, even rental cars), accommodation costs & meals for business days.

You will need to keep written evidence of all expenses. If you were away from home for six or more consecutive nights, you must use a diary or similar document to record the particulars of each business activity before your travel ends, or as soon as possible afterwards. Under certain circumstances the ATO also have reasonable allowance limits where you can claim up to a certain amount without having to keeps receipts, but if you go over this amount you will need to keep receipts.

3. Office supplies

Don’t forget all the stationary that you purchase. It is all fully deductible provided you can substantiate you’re using them for your business. This is even so if you have purchased a new computer or tablet. However, keep in mind that if you only have one tablet or laptop, then most likely you’re also using it for personal purposes as well. And in this case, you can only expense the percentage of how much the equipment is used for business (i.e. 50% or 60%).

4. Motor Vehicle Expenses

If you’re working from home, you obviously can’t deduct any kind of daily commute to your office—you also can’t deduct your morning trip to the local coffee house (no matter how necessary it might be!). But if you travel to meet a client, perform a job outside the home, purchase business supplies, conduct research, or do any other kind of activity for your job, you can deduct this travel.

Click here to see the 4 different methods to calculate your deduction from the ATO.

DISCLAIMER: All information provided in this article is of a general nature only and is not personal financial, taxation or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this article (including Award Accounting for Business Success Pty Ltd, each of its directors and employees) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.

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