As a small business owner, staying on top of changes to tax deductions is crucial to maximise your financial benefits. This tax time, there are a few key updates that you need to be aware of, especially if you operate your business from home or use a vehicle for business purposes. Let’s dive into the details and ensure you’re well-prepared for the upcoming tax season.

Cents per Kilometre Method: A Boost for Car Expense Claims

If you’re a sole trader or in a partnership with at least one individual partner, the cents per kilometre method is a viable option for claiming car expenses. The good news is that the rate for this method has increased from 72 to 78 cents per kilometre in the 2022–23 income year. Under this method, you can claim a maximum of 5,000 kilometres per car, annually, for work-related purposes.

What makes the cents per kilometre method appealing is its simplicity. The 78 cent rate covers all your vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. However, it’s important to note that you can no longer claim these costs separately.

Car Limit for Business Owners: A Higher Threshold

The car limit, which determines the maximum value for calculating the depreciation of passenger vehicles designed to carry less than one tonne and fewer than nine passengers, has also increased. For the 2022–23 income year, the car limit stands at $64,741. It’s worth mentioning that this limit applies to vehicles such as cars, excluding motorcycles or similar vehicles.

Operating Your Business from Home: Updated Deductions

If you operate your business from home, even part-time, there are changes in deductions you should take note of. The fixed rate method, used to calculate home business expenses, has increased from 52 cents to 67 cents per hour worked from home for the 2022–23 income year. One significant advantage of this update is that it no longer requires you to have a dedicated home office space.

Under the fixed rate method, various expenses are covered, including electricity, gas, stationery, computer consumables, internet, and phone usage. Additionally, you can still claim separate deductions for expenses not included in the hourly rate, such as the decline in value of depreciating assets like your laptop or office furniture.

Updated Record-Keeping Requirements

Alongside these changes, it’s important to be aware that the records you need to maintain for your work-from-home deductions have also been revised. As a responsible business owner, keeping accurate and up-to-date records is crucial. Ensure you maintain a record of all relevant invoices, receipts, and documentation to support your claims.

Seeking Professional Assistance

Navigating the complex world of tax deductions can be overwhelming, but you don’t have to do it alone. Remember that registered tax and BAS agents are there to help you with your tax-related queries and ensure you stay compliant. Their expertise can save you time, money, and potential headaches.

As a small business owner, staying informed about changes to deductions is vital to make the most of your tax returns. With the increase in the cents per kilometre rate for car expenses, the higher car limit for business owners, and the updated fixed rate method for work-from-home expenses, it’s crucial to adjust your record-keeping practices accordingly. By seeking professional assistance when needed, you can ensure a smooth and efficient tax season, maximising your deductions and minimising any potential risks.  Call the team at Journey2 today