Tax Deductions for Sole Traders
By Travis Bacon
August 01, 2021
Filing Tax Returns can often be a daunting task for sole traders. This is because of a lack of clarity regarding the process and eligibility of filing tax returns. It gets particularly confusing in cases where sole traders are unaware of the tax deductions they can claim. Tax deductions can be defined as expenses that can be subtracted from the taxable income to reduce the tax payable. Fascinating, isn’t it?
Tax Deduction Checklist
With complexities involved regarding what to claim and what to let go of, many sole traders end up getting perplexed. However, it is not as difficult as it appears. Here is a checklist to help you learn what can be claimed if you are filing returns as a sole trader, according to the Australian Tax Office:
Home Office Expenses
Business Related Travel
Training and Development of Employees
Telephone & Internet Bills
Motor Vehicle Costs
Repairs & Maintenance of Equipment
Tax Agent Fee's
Capital and Depreciable Expenses
The list above refers to regular operational expenses that companies can claim over time. However, in the case of depreciation charged on capital expenses, claims can be made spanning several years. This is primarily because charges like these are often continual and are meant to have a longer life. Therefore, examples of such expenses include:
Computers & Other Technology
Plant & Equipment
Private Use Expenses
However, it must also be noted that claims can only be made for expenses that are directly associated with the business portion. This implies that in the case where some of the costs are related to personal use and for business use, only those costs can be claimed that can be distinguished to be a part of the business. In other words, personal expenses, or domestic household expenses cannot be claimed for any tax deductions in this regard. Having this checklist in mind when filing for tax returns is particularly fruitful because a lot of sole traders end up saving significant sums of money.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek personalised tax advice from us at TaxDigital. Information is current at the date of issue and may change.