Business Deduction Checklist

Checklist of business deductions

This non-exhaustive checklist is designed to provide an easy reference guide to the types of deductions that might be claimed by businesses.

Note that these deductions may not necessarily be available, and before deciding on the deductibility of an outgoing, the business’s circumstances should be considered.

All businesses are required to maintain records of every transaction that relate to their income and expenditure as well as CGT transactions, GST, FBT and other requirements. If there is any private use element, that should also be noted in the records. Car and travel expenses must be substantiated. Note: All section and division references are to the Income Tax Assessment Act 1997 (ITAA97) unless otherwise stated.

•  Accident insurance premiums;
•  Accounting fees for preparation of income tax, activity statements and FBT returns etc. (s25-5);
•      Accounting fees relating to investigations, objections and appeals and advice;
•  Advertising expenses;
•  Agent’s commission. Collection of rent;
•  Annual leave. If paid by the employer (but not on accruing liabilities);
•  Audit fees;
•  Bad debts;
•  Bank charges. Including debits tax;
•  Borrowing expenses. Claim in full if $100 or less, if not, over the loan’s term or 20% each year if five years is shorter;
•  Business trips;
•  Capital works. On buildings and structural improvements;
•  Car expenses. Applies to employees, partners, and self-employed persons;
•  Car parking. In certain circumstances;
•  Cleaning expenses;
•  Clothing. In certain circumstances;
•  Conference expenses;
•  Copyrights, patents and designs. See Capital allowance provisions (Division 40) and the R&D concessions;
•  Cultural bequests. If made to Australian fund, public art gallery museum or library;
•  Decline in value (depreciation). Of plant or articles used in business;
•  Directors’ fees;
•  Discharge of mortgage expenses, where loan money used to derive assessable income (s25-30);
•  Distributions by co-operatives. To members;
•  Donations of property to deductible gift recipient. If market value is greater than $5,000;
•  Education expenses. If paid for employees, but FBT may apply;
•  Electricity connection costs. To business premises. Beware capital allowance provisions (Division 40);
•  Entertainment of employees. But FBT may be payable;
•  Environmental impact studies. Pooled and treated under the uniform capital allowance system (decline in value);
•  Environment protection expenditure;
•  Equipment service fees;
•  Exploration or prospecting. For minerals (including petroleum) and quarry materials;
•  Film investment. 100% deduction for investment in certain Australian made films;
•  Freight costs;
•  Fringe benefits tax;
•  Fuel and oil;
•  Gifts of $2 or more. To certain prescribed or approved organisations;
•  Gifts to clients, etc. But not if entertainment;
•  Gratuities to employees. Recognition of past services;
•  Home office expenses. Apportionment of interest, rates, etc. only if a business is carried out on the premises;
•  Insurance premiums. Including accident insurance paid by employees, business insurance and property insurance;
•  Interest paid;
•  Internet and data access costs. Share investing and business websites. Also, beware capital expenditure;
•  Land tax. Business or rental premises. Deductible when incurred;
•  Lease payments;
•  Lease preparation, registration, or stamping expenses. Paid by either the landlord or (a business) tenant (s25-20);
•  Leave payments. Paid by employer (but not on accruing liabilities);
•  Legal expenses. Including discharge of a mortgage (s25-30) or relating to borrowing expenses (s26-40);
•  Licenses to operate business. Prepayment rules may apply;
•  Losses, current year. Loss claims by companies may be limited (Division 165), (s170-10);
•      Losses by trusts are subject to trust loss provisions;
•  Losses, previous years. Company losses brought forward may be limited unless the company can pass certain tests;
•  Loss (book loss) on disposal of depreciable assets;
•  Loss through misappropriation by employees, or by theft (s25-45);
•  Maintenance expenses (s8-1);
•  Management expenses. Annual fees but not the capital cost of subscribing to some income-earning investments;
•  Managing tax affairs. Costs of travel, accommodation, advice, booklets, seminars etc;
•  Mortgage protection insurance (s8-1);
•  Moving trading stock;
•  Newspapers for employees. Depends on occupation. Share traders (and maybe investors) can claim;
•  Overseas travel expenses. Substantiation rules apply;
•  Payroll tax;
•  Petrol and oil. Not subject to substantiation rules;
•  Petroleum resource rent tax;
•  Postage. For investors or businesses;
•  Power, lighting and heating;
•  Printing and stationery;
•  Professional or business association subscriptions and fees. Prepayment rules may apply;
•  Project expenditure. To be written-off over life of project;
•  Protective clothing;
•  Rates and taxes. On income-producing or business properties;
•  Rebates and discounts. Given to customers;
•  Rent of business premises. Including part of the costs for a home used for a business;
•  Repairs to cars, equipment, or to an income-producing property (s25-10);
•  Research & Development costs;
•  Retiring allowances. Paid to ex-employee (or their dependent) for past services (s25-50);
•  Royalties. Paid for use of equipment etc. – withholding tax may apply;
•  Salaries and wages paid to employees;
•  Scientific research related to business. If incurred before July 1995 and R&D claim is not available;
•  Self-education expenses. Only if related to employment/business;
•  Seminars. In certain circumstances;
•  Sickness/accident premiums. In some cases;
•  Storage expenses;
•  Structural improvements. In some cases;
•  Subcontractors. May be considered employees and subject to the 9.5% superannuation guarantee provisions;
•  Superannuation contributions;
•  Support payments to a subsidiary;
•  Tax agent’s fees. Preparation of income tax, fringe benefits tax returns, GST etc. (s25-5);
•  Telephone expenses;
•  Telephone line installation;
•  Tool replacement. Depreciation;
•  Trade journals;
•  Trading stock purchases;
•  Travelling expenses. Domestic and overseas, but note the substantiation provisions;
•  Traveller accommodation buildings;
•  Uniforms;
•  WorkCover/worker’s compensation premium;
•  Worker entitlement funds. Only if fund approved under regulations;

Peter McCarthy