We’re now well into the second half of the financial year. In preparation for tax time, you might be thinking about your business expenses and what deductions you can claim. As a business owner, it’s wise to have some understanding of deduction rules to reduce your tax. You’re allowed to claim deductions for most expenses that you incur in the operation of your business to earn an assessable income. These expenses may have been paid for already, or they may be accrued expenses.
What are accrued expenses?
Accrued expenses are those expenses that have been incurred but not yet paid for. Common examples of accrued expenses include:
- Wages and salary – your employees have worked but not been paid by 30 June. This can be claimed as a deduction in the current financial year.
- Commissions – your business may owe contractors and other businesses for their services provided up to 30 June. The accrued amount can be claimed in the current financial year.
- Staff bonuses.
- Business utility bills – this can be an accrued expense when the period of the bill extend beyond 30 June.
- Repairs and maintenance expenses – these can include fixing machinery and maintaining the premises that are used to generate income.
- Accrued marketing and advertising expenses.
- Accrued loan interest.
In general, you’re allowed to claim deductions for those expenses which are related to earning an income, so expenses of a capital nature do not qualify. Capital expenses may be claimed under other methods such as depreciation or capital works deduction. In addition, expenses are not tax deductible if they were incurred to earn non-assessable income.
It’s imperative that you maintain good records and keep all relevant documentation as evidence that your business has incurred an expense.
Claiming deductions for accrued expenses is one way reduce your taxable income. Contact Moiler to discuss how you can maximise your deductions from accrued expenses and other tax saving strategies.
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Ian Moiler Pty Ltd is an Authorised Representative of Count Financial Ltd ABN 19 001 974 625 AFSL No. 227232 which is 85% owned by CountPlus Limited ABN 111 26 990 832 (CountPlus) of Level 17, 1 Margaret Street, Sydney 2000 NSW and 15% owned by Count Member Firm Pty Ltd ACN 633 983 490 of Level 17, 1 Margaret Street, Sydney 2000 NSW. CountPlus is listed on the Australian Stock Exchange. Count Member Firm Pty Ltd is owned by Count Member Firm DT Pty Ltd ACN 633 956 073 which holds the assets under a discretionary trust for certain beneficiaries including potentially some corporate authorised representatives of Count Financial Ltd. The information on this web page is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances.