At Moiler, one of the most common questions we answer is around claiming accrued small business expenses that can be claimed by owners.
Small businesses can claim accrued expenses incurred but not yet paid given it can be reasonably determined there is a present existing liability. Typical expenses include staff bonuses, salary and wages, and interest expense.
You can claim a full deduction in the year of a prepayment if you’re an individual or have a small business with a turnover of less than $2m.
A prepayment is an expense that’s paid upfront and provides benefit for up to 12 months and into the following financial year. Common prepayments include interest, vehicle registration, lease payments, rent, business travel, subscriptions, seminars and training expenses, and general and income protection insurances. Consider paying insurance premiums by 30 June where possible.
A trust or company that derives only passive income (e.g. rent, interest or dividends) can’t claim a full deduction in the same year of the prepayment as it’s not carrying on a business.
Prepayment rules don’t apply to expenses incurred under Commonwealth or State law so you may prepay wages, bonuses and superannuation (subject to the employee deductible limits).
If you have any questions in relation to your business, please contact us.