For most Australian online businesses and influencers, the idea of dealing with one’s finances is seen as a daunting task that’s filled with complexities.
Whether it may be getting one’s bookkeeping in order according to e-commerce accounting standards or brushing up on tax rules, the list of what needs to be done is endless. When you take the legalities of Australia’s implemented laws and regulations, however, it adds even more difficulty into the mix, which is a problem that has left many entities in a whirl.
Although each concept is worth considering and brushing up on, there’s one legal component that online business owners and influencers should get familiar with: The Other Deductible Rule.
What is it, and how can it best benefit your business?
The Other Deductible Rule is best defined as a legal advantage that affects the way a company or entity records and tracks their expenses by letting the business record it instead.
By taking advantage of the opportunity to pay your expenses and claim them out of your business instead of your tax return, you’ll be able to cut out the amount of paperwork you’ll need to file. Additionally, paying for expenses directly from your business’s earnings also frees up the opportunity to save more money that can be used on other pertinent occasions.
The concepts of legal control and beneficial ownership
One crucial consideration that anyone has to take into mind when using the Other Deductible rule is that it’s paramount to understand the concepts of legal control and beneficial ownership to grasp the way they work. To best understand how you can safely and efficiently use this rule to your advantage, let’s go over these crucial concepts in further detail:
This legal control bestows a person or entity with the right or power to buy and sell an asset. Yet, it also prevents them from genuinely owning or enjoying the benefits of ownership. With this concept, an individual can control what happens to an asset concerning ownership, but they won’t be able to rake in income or use the asset for their interest.
Beneficial ownership Beneficial ownership is a legal concept that allows a person to enjoy the benefits of ownership on a specific asset or entity but does not have the title in their name. Although one may not be able to buy or sell a title of a particular asset because it’s in another person’s name, they can still enjoy other privileges, such as usage and income.
Where these concepts come into play in the Other Deductible rule
Both of the concepts mentioned above play a crucial role in the way the rule works because the Australian Taxation Office (ATO) uses them to define its purpose and functions. Using the legal control and beneficial ownership principles, the ATO sets the purpose of the Other Deductible Rule and recognises it based on the following definition:
“If it’s deductible to the company (or vice versa), then it’s deductible to the individual (and vice versa).”
By using this rule correctly and further understanding the way both beneficial ownership and legal control principles work together, you’ll be able to do the following effectively:
Determine which opportunities you can use to cut your expenses down
Make life easier when it comes to filing your claims while trimming down your documentation/recording.
As an Australian business owner or influencer, the Other Deductible Rule is a tool that you should brush up on as it can help ease up the way you deal with your taxes while saving more time and money. By taking this guide into account and working with a dependable firm that can help you out, you’ll be able to streamline the way you deal with finances in no time!
We’re an e-commerce accountant in Australia that assists big companies, online start-up businesses, and influencers. Get in touch with us today to learn more about how we can help you stay up to date and on-track with your finances!