Expenses - Business or Personal?

Did You Know?

People claim expenses in businesses all the time - materials for building products that they sell, wages to staff, motor vehicle expenses for getting out and visiting clients, rent for premises used in selling, storing or manufacturing goods, legal expenses incurred to recover lost profits for the supply of defective plant, insurance for professional indemnity or to ensure plant and machinery. the list goes on, BUT there are some expenses that people would like to claim that unfortunately can not be.  

The expenses listed above are claimable because there is a direct link between the expenditure and income making potential i.e. without materials there may not be goods to sell, without the use of a motor vehicle it would reduce the sales figures achievable, without the cost of the lawyer recovery of the profits on defective goods would not be realised and without insurance to recover assets used in the business in the event of a disaster the business could close.

Questions we get asked though are - 

I'm self-employed can I claim the cost of child care as without it I can not run my business?  The answer is no.  Similarly this is not deductible to employees who have to use childcare in order to go to work and earn a living.

I use my vehicle to get to and from my business, I should be able to claim this use.  Unfortunately even though you may need the car during the course of your working day the travel from home to the business is classified as private and not income-producing travel.  In situations like this where you need to use a vehicle a log book is required to be kept for 3 months minimum and the proportion of business to private use is recorded.  This needs to be done every 3 years unless your situation has changed e.g. using the car more for business.

I have a home office that I use sometimes to conduct my business is there anything I can claim?  Yes, first the area used as a proportion of the total area of the home is calculated.  From there you can claim power, insurance, interest on mortgage, actual toll calls incurred in income-earning activities and a portion of the telephone rental. 

These are just some examples there are lots of areas to consider, but if you remember that to be deductible there needs to be a direct link between the expense and income-earning activities then there this will help you in your decision to include or not.


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