Rules that apply to personal services income (PSI) may limit the deductions you or your business can claim.
Most of your business income is assessable; this means you must declare it and it is subject to tax.
Tax deductions
Tax deductions reduce your income; they are taken off your total assessable income and you pay your tax on the left over income. You are not reimbursed for your tax deductions.
You can claim tax deductions for expenses incurred in running your business, providing they are not private or domestic expenses, such as childcare fees. Entertainment, fines and some other expenses are also excluded.
Common business expenses that may be claimed include:
- advertising and phone costs
- business travel
- fringe benefit tax
- motor vehicle costs
- depreciation of assets such as plant and equipment
- salary, wages and superannuation contributions
- repair and maintenance costs
- costs associated with running your business from home.
The ATO has more information regarding income and deductions for business.
Tip
Tax concessions
Generally, to qualify for small business tax concessions your business must have an annual turnover of less than $2 million.
You can choose the concessions that suit your business providing you satisfy any associated conditions. You will need to check each year to determine whether you still qualify for these concessions.
The ATO has more information regarding tax concessions for small business.
Action to take
- Visit the ATO's online learning platform essentials to strengthen your small business to access 21 free short courses in deductions and more
- Read the additional information on deductions for home-based business and depreciation on the ATO website.
