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The Weirdest tax deductions Allow by Australian Taxation Office
Xboxes, dogs and pedicures might sound like strange tax deductions for small businesses, but for the right sort of business they’re perfectly legal.With not long until the end of the tax year, small-business owners are turning their minds to deductions. The introduction of the $20,000 depreciation tax concession in the federal budget has sharpened the focus on what’s allowable and what’s not.
Treatt says many of his clients are buying prefabricated studios to put in their backyards and deducting them from their tax. These often cost less than $20,000 so are eligible for the depreciation concession, though they can also cost a lot more.
“If you did have your business operating from home, you could shift it into the back yard as opposed to the lounge room or the study,” says Treatt. But buyers have to be cautious that the studios aren’t more like granny flats, with a bathroom and bedroom.”If it’s gone too far towards being a flat then there’s a high risk that the tax office could come in and deny the deduction,” he says.
FOOD AND WINE
Small-business owners can deduct the cost of their meals and alcohol when they’re travelling for work and stay away overnight, says Michael Garrone, a director of Brisbane-based small-business accountancy practice BusinessDEPOT. “It’s all about trying to keep the receipts and invoices,” he says.
There’s no particular distance that business owners have to travel away from home to claim the deductions – it just needs to be impractical to get home. With his clients, Garrone uses a rough guide of 100 kilometres from home.
If you have a guard dog, you can deduct its food and vet bills. “It’s the same principle as cattle dogs for farmers that are working animals,” says Garrone. “You’ might even take the dog home at the weekends to be with your family.”
But the dog can’t just be a family pet. And sorry – there’s no such thing as a guard cat.
SUNSCREEN, HATS AND MAKE UP
Business owners who work outdoors, such as gardeners or builders, can get a tax deduction for sunscreen, hats and sunglasses. These deductions were allowed only after court challenges to the ATO by outdoor workers. “They were able to show that there’s a sufficient nexus with work,” says Garrone.
“It’s always a fine line because if you look at myself, I wear a suit and tie but you can’t get a tax deduction for those. Yet the only reason I’m wearing them is for work, but it’s more that it’s seen as being everyday clothing. There’s nothing peculiar to the environment you’re in.”
The Australian Tax Office has recently confirmed that small businesses would be able to deduct ping-pong tables if used in the business but a whole range of employee entertainment expenses are deductible, says John Corias, a senior partner at MAS Accountants.
“The workplace has changed dramatically over the past few years,” he says. “Dart boards, Xboxes and Foxtel subscriptions are allowable as a means of getting people refocused and giving them a bit of downtime in the workplace. The Tax Office has acknowledged that.”
KNIVES AND PEDICURES
The general principle with tax deductions is that the item is allowable as long as the expense is incurred in earning assessable income, says Corias. “You may need to defend it at some point of time, but if you can justify the expense then the answer is you would probably get it across the line.”
This opens the way for deductions that might at first sight seem unusual, but make sense in context. A knife swallower would be able to deduct their knives and a hand model could deduct the cost of pedicures.
“For example, if an executive assistant tried to claim make-up, colours and brushes, they wouldn’t be able to. But if you’re preparing deceased bodies for a funeral service then of course all those sorts of things would be deductible,” he says.