The amazing thing about the 21st century is the now-dynamic nature of the business spectrum. You have practically all kinds of businesses that suit a wide variety of needs and wants, as well as those who serve niche purposes. Whatever the purpose is, the evolution of this field has given people so much freedom as to what they want to start.
Home-based businesses are one of the best kinds available, as everything can be done from the comforts of your own home. If you are fortunate enough to be a business owner from home, there may be some things about your line of work that you are unaware of. In terms of the taxman taking cuts, there may be deductions you can take if your work is from home and void of physical offices. Without further ado, here are some tax deduction tips that are most definitely welcome for any owner of a home-based company:
Running Expense Deductions
Running expenses are increased costs that come from facilities used within your home as a part of your business activities, which include electricity, phone bills, and cleaning costs. You may be able to claim for deductible expenses, but only from the usage of the business and not general house expenses.
One way to do this is to calculate how much floor space is used for business with the entire home. This can then be applied to find the cost of utilities used to run operations. You may also be able to calculate the before and after results of setting up your home-based operations. Additionally, be sure all kinds of documentation is available to support your claims, as well as assuring the exclusion of the private or domestic proportion of the expenses.
When it comes to owning a traditional business, there are rules and regulations that are related to owning, renting, or using a space for conducting operations. Occupancy expenses are one of these, in which they are incurred in relation to the aforementioned points of use of space. These occupancy expenses normally include rental payments, mortgage interest, council rates and house insurance plans.
To be applicable for tax deductibility, your home-based workspace must pass the interest deductibility test. The test will include an analysis of your space, such as identifying signages at the front of your home, its suitability for private or domestic use, and its business use ratio. These will determine if your home is applicable for tax deductions.
Be careful when claiming certain expenses, as claiming mortgage interest and rates can subject your property to Capital Gains Tax.
Motor Vehicle Expenses
Because work is based from home, home-based enterprises can usually claim a deduction for travel costs incurred in business-related travel. Trips such as visiting a client’s location, purchasing equipment for the business, doing banking, mailing, or visiting your bookkeeping service’s office can be filed for a tax deduction.
Documentation Helps In Tax Deductions
Remember that in bookkeeping for eCommerce or any home-based business, the most important thing to have is documentation. This means keeping all receipts and tax invoices. While some pieces of paper may seem insignificant, they may assist you in getting deductions from your gross income and significantly reduce the tax required to be paid.
For small businesses being run from home, these tax deductions can be a big help in savings that can be used to continue operating and investing in other things. The easiest way to determine if you are eligible for these deductions is by hiring the services of an accountant for online businesses. By having professional help with bookkeeping, you will have fewer chances of making mistakes, and you will see where taxes can be deducted.
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