The calculation of income tax for businesses becomes more complex as business activities and income streams grow.
There are two primary considerations that arise when calculating income tax: assessable income and deductions.
This includes all aspects of income from all your business activities and any other business income:
• Cash income
• Commissions, investment earnings, gratuities and compensation payments
• Income not part of everyday business activities
• Income from online activities
• Income from the sharing economy
• Income from crowdfunding
• Personal services income
• Foreign income
It is essential that when completing the tax returns for a business, all of the above types of income are included. Each type of income has its own specific considerations which need to be met, some more complex than others.
More often than not, business expenses will be tax deductible. However, they need to be directly concerned with business operations as opposed to personal use and must have records to verify them.
Deductions can be applied to the following expenses:
• Motor vehicle expenses
• Home-based business
• Business travel expenses
• Workers’ salaries, wages and super contributions
• Repairs, maintenance and replacement expenses
• Other operating expenses
• Depreciating assets and other capital expenses
• Carbon sink forest expenses
For each of these deductions to apply, appropriate records which follow the ATO’s guidelines should be kept.
Talk with your LT accountants to review your assessable income and tax deductions. Contact LT Today.