Do you provide your employees with gym memberships or concert tickets? Or maybe you work for a company that provides you with a vehicle or accommodation? There are lots of perks that business can provide to their employees outside of salaries and wages – and these are called fringe benefits and they may apply to you if you worked at home due to COVID-19.
FBT is not as simple as handing out freebies. Employers have to pay tax on these benefits they provide, and the amount can depend on the type of fringe benefit they’re providing.
TAX TIME IS NIGH and it might be a good time to think about whether there are any assets your business may need, and try to get them in before June 30 rolls around. Whether it’s new computers, tablets, office furniture, a new car — as long as each item costs less than $20,000, you can deduct it immediately, rather than depreciating it over time, as was the previous method for assets over $1,000 in value (depreciation still applies for asset purchases above $20,000) — but only until and including 30 June 2018.
The small business tax breaks were introduced by the Abbott-Hockey government, but having already been extended, they will cease on 30 June 2018. Following this date, any big ticket assets for your business (and of course there are some exceptions) can be used to reduce your taxable income immediately.
Pick an asset, any asset…
There are a lot of items you can deduct, with the exception of some small items, such as horticultural plants, software that’s allocated to a software development pool and some capital works, which have special depreciation rules. If you’re not sure of what you can claim, it’s wise to ask your account or financial adviser first, particularly if you have a penchant for horticultural plants (perhaps try artificial ones?), otherwise make sure to keep your receipts!
After 1 July 2018, the asset threshold will reduce back to $1,000. After then, any asset purchase you make that’s greater than $1,000 will have to be depreciated, using the traditional methods of depreciation, which you can read about in this blog post.
Australia is a services nation
While you’re thinking about starting a business, don’t forget to consider starting a business within the leading four service groups, identified by Australia’s Chief Economist Mark Cully:
Professional and support services
Information and communications technology (ICT) and the digital economy
Trade, transport and logistic services
Professional and support services, in particular, is currently experiencing a phase of high growth, largely because starting a business in this sector is both low risk and cost. Most businesses operating within the professional and support services sector are home-based, providing vital services to other businesses located across Australia and, sometimes, the world.
Starting Your Own Bookkeeping Business
One such profession currently in high demand is bookkeeping, specifically BAS and tax services. As more and more Australians start their own businesses, there becomes a greater demand for bookkeeping, BAS and tax services. EzyLearn recently partnered with National Bookkeeping to help registered BAS and tax agents to start, growth and develop their business, by becoming National Bookkeeping licensees.
Save your receipts: Tax time is coming (and so are weird tax deductions)!
If you’ve been following our coverage of the Government’s recent budget measure that allows small businesses to write-off assets under $20,000 (rather than depreciating them over time), then you’re probably also aware that the tax breaks have already come into effect.
Some businesses have been upgrading company cars, technology, and office furniture, and so long as each purchase doesn’t exceed $20k, they’ll go towards reducing the business’s taxable income this financial year. But there are some other, more unusual, purchases businesses are also able to claim as tax deductions, according to a recent report in The Sydney Morning Herald.
Unusual Tax Deductions
Ping pong tables, Xboxes and cable TV subscriptions: As long as they’re used for employee entertainment – in other words, the ping-pong table or Xbox is located in the workplace and used by staff during their lunch breaks or other downtime – then they’re an allowable tax deduction.
Backyard studios: Many home-based workers are taking the opportunity to install prefabricated studios in their backyards to be used as their office or studio, so long as they don’t border on a granny flat with kitchens and bedrooms. Most prefab studios cost well under the $20,000 threshold, and make a nice change for home-based workers used to cramming themselves into a bedroom, office nook, or wherever there’s free bench space.
Artwork: You usually find that any art in a restaurant or café has been donated by a local gallery owner, or more commonly, rented from galleries specialising in corporate art rentals. For the next few years, however, businesses will have the opportunity to purchase their own artwork and claim it as a tax deduction.
Knives and pedicures: Perhaps two of the strangest tax deductions on the list. Knives can be claimed as a tax deduction, according to the smh, if the person was a professional knife swallower (or, I dunno, a chef?), while foot models could claim pedicures, and make-up is a tax deduction for make-up artists… of the dead. Of course, I’m willing to wager that make-up artists of living, breathing people can also claim the tools of their trade too.
There are only a couple more weeks left of June, so it’s a good time to make any asset purchases you may need for your business. Whether it’s a car, new computer, backyard studio, or art for the office, get in before June 30 and you’ll be able to claim it as a tax deduction on this year’s tax return.