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It’s hard to keep up with all the Australian Taxation Office’s (ATO) rules, so sometimes you may inadvertently claim expenses you’re not entitled to.

Filing an accurate tax return is vital, otherwise your refund could be delayed – or, in the worst-case scenario, you could be hit with a penalty.

Here are three mistakes you could unwittingly make:

1. Not apportioning an expense between business and personal use

If you use an asset for business and personal use – such as communications, motor vehicles and computers – you may only claim the business portion of that expense as a tax deduction. You must also prove the business-use portion.

Avoid this mistake by asking your accountant which expenses you must apportion and what rates the ATO automatically allows. If the ATO’s rates are too low, you can claim a higher portion in some cases by keeping a detailed record of your business use.

2. Deducting expenses that are not tax-deductible

The ATO does not allow taxpayers to claim certain expenses, like entertainment, as tax deductions – not even if you take your biggest client out to dinner. Another example is uniforms – some uniforms you may claim, others not.

Avoid this mistake by asking your accountant to check your list of expenses for any that might not be allowed.

3. Claiming GST on items you’re not allowed to

Some small businesses may record all their invoices and receipts in the same way. So if they’re registered for GST, they may accidentally claim a tax credit on:

●        Expenses that are not tax-deductible, like entertainment

●        Expenses they were not charged GST on

●        A receipt that contains mixed items, of which only some are tax-deductible

If you record your expenses via an app, you can avoid this mistake by filing your receipts in different folders named GST, NO GST, or MIXED. If you still use paper, you can make stamps with NO GST and MIXED GST and stamp all your receipts.

You can also print a detailed GST report and ask your accountant to check if there are any disallowed claims on the report.

 

Unsure which expenses to claim? Get in touch to learn the best way to legally minimise your tax by emailing info@accountingexcellence.com.au or calling 0431 981 005.