By Nina Hendy
Emily Duffell has no hesitation in claiming children’s pillows, doona covers and pyjamas on her tax. Decorative wall hangings, bedding and night lights will also be claimed by the mother of two.
The Melburne sleep consultant uses the items in promotional videos for her business, Sleepy Starz. “We can’t always use our children’s bedrooms to make our videos, so we’ve had to set up staged bedroom scenes,” Duffell says.
She’s not alone. As end of financial year looms, Australian small business owners are searching for legitimate and interesting tax deductions to improve their business. Particularly in light of the government’s $20,000 instant tax write-off.
Tax adviser Tania Tonkin agrees that the $20,000 tax break is bringing forward spending decisions. “The important thing is you must be able to prove the item is work-related and be prepared to show evidence if needed. The ATO isn’t giving small business owners a free $20,000 gift,” Tonkin, of dcma advisory says.
Here are some of the other surprising things you may be able to claim on your tax, if you’re able to justify its use in your business.
Gaming consoles
A business owner looking for ways to raise the good vibes in the office decided to legitimately claim the latest Xbox, Playstation and Nintendo games consoles.
“The business owner didn’t want to make their employees choose between their favourite console, so they got one of each. Entry to the office Friday afternoon gaming competitions are now highly sought after in this friendly but competitive office,” senior tax manager for online tax portal Etax, Liz Russell says.
Coffee machine
With so many employees ducking out for coffee in the morning, some small business owners invest in their own coffee machine. “This great office perk keeps employees happy and caffeinated, making it a wise investment that’s also fully tax deductible at tax time,” Russell says.
A dog
What’s the security like at your office? One of Russell’s clients legitimately claimed the purchase of a purebred German Shepherd (and associated equipment). “This business needed after-hours security and man’s best friend was a fantastic, tax-friendly addition to the team.”
Garden gnomes
Tonkin was recently asked about claiming several garden gnomes for a rental property. “If it’s a holiday house that’s rented out, it’s reasonable that some form of decoration is appropriate, so it’s legitimate. You probably wouldn’t be able to argue a Picasso painting, though,” Tonkin says.
A caravan
If you’re able to prove that your caravan is connected to your business, it could be a legitimate claim.
A client of Tonkin’s was able to claim the caravan as it was only used for business, as the client travelled around the state on a regular basis. “The caravan saved him the cost of hotel accommodation, so it was a clever idea, really.”
A handbag
If you’re using your bag for work purposes and they essentially fulfil the same purpose and function as a briefcase or satchel, you may be able to claim it as a tax deduction.
The Australian Taxation Office says that it’s the use of the item rather than its description that is relevant. If in doubt, remember that the tax office loves documentation, so keeping a log book for up to three months documenting use of the bag can help you get the claim over the line.
A word of warning
While these claims are interesting, they don’t necessarily make good business decisions, Russell points out. She urges business owners not to be creative in their claims.
“You should always seek the advice of a tax agent before making any big ticket purchases to make sure firstly what you’re looking to purchase is claimable on your tax return, and secondly, that it actually makes financial sense for your business to make the purchase,” she says.
One of her clients didn’t think a recent decision through, borrowing $20,000 to purchase a new car even though their business was running at a loss. The deduction they were hoping to claim immediately can’t actually benefit them right away, Russell explains.
“They now need to wait until the business actually starts turning a profit at some point in the future to deduct the $20,000 car purchase against income, all the while having an additional loan that needs repaying right away.”
Meanwhile, there have been calls made to simplify the tax system at the Small Business Association of Australia Summit this week.
The current tax system is far too complicated and expensive in both time and money to manage hinders success for small business and this needs to change, various participants agreed.
Source: The Age
