All the preparation and planning for tax time is sweetened by the possibility of claiming a refund for all your deductions. But, when you’re self-employed and dealing with your own tax affairs, it’s easy to sell yourself short. Whether you’re unsure exactly what you can claim for, or you’re failing to document it sufficiently in your return, here’s some advice to help you give this year’s refund a boost.
Claim all your expenses
Claiming your business expenses is the easiest way to boost your tax refund, but are you noting everything you’re entitled to? While you may be aware that you can claim vehicle or equipment expenses, did you know that advertising costs, subscriptions to software and tools, and pre-paid expenses also qualify as deductions? You may even be liable to claim a percentage of your electricity bill or mortgage for your home office.
Save all your receipts
To claim a deduction, you’ll need to show proof of your purchase – and receipts are one of the most convenient forms accepted. They state exactly what you paid for, and when you paid for it. Unfortunately, receipts can be easily misplaced and a nuisance to store.
If you end up with a shoebox full come tax time, it might be worthwhile using an app, such as QuickBooks Self-Employed, which lets you scan and store receipts on your mobile. Missing a receipt? You can still claim for work-related items totalling $300 provided you can show you spent the money.
Donate to charity
Make a donation to a recognised not-for-profit organisation and, not only are you doing good and demonstrating your social responsibility, you may also be able to claim it. To be eligible for charitable deductions, your donation must be a gift and have no material benefit to you. For example, buying raffle tickets or items in a charity auction gives you something in return and so may not be eligible. One exception is sponsorship, which you can often claim as a business expense. For any donations over $2 you can claim the full amount, so the more you donate the bigger your refund.
Write off any bad debts
Are you holding on to any invoices that aren’t going to be paid? As frustrating as this situation is, some good can come from them in the form of a tax refund. How does it work? Essentially, your income is reduced by the amount of the invoice written off. You may also be entitled to a GST credit for the GST component. It’s important to note that this is only possible if you use accrual accounting – that is, you only record the income when you perform the service. If you do it on a cash basis, there’s no amount to offset and, therefore, no deduction.
Make super contributions
As a sole trader, you’re not obligated to pay your own superannuation. However, doing so is not only a sensible way to save for your retirement, it’s also tax deductible. To make a claim, you must use a complying super fund, notify them of your intention, and receive an acknowledgement. It’s worth noting that the cap on your contributions is $25,000.
Hire an accountant to help
While you might begrudge paying for financial help, getting an accountant to scan your records for possible deductions is a sensible way to ensure you’re maximising your refund. Plus, you claim back the cost of hiring one as a business expense. While you can’t avoid filing your tax return, if you claim all your expenses and look for other smart ways to reduce your taxable income, your rebate will look a lot healthier this financial year.