With the end of the financial year approaching, small business owners are getting ready to lodge their tax returns. While many entrepreneurs are familiar with common business expenses such as rent, utilities and office supplies, there are several lesser-known items that can also be claimed as deductions. Including all deductions that are available to you will significantly reduce your taxable income and maximize your savings.

To help you make the most of tax time, we spoke to some experts to provide you with a list of eight things you might not have realised you can claim as an expense for your small business, plus some hot tips.

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1. Prepaid Business Expenses:

By paying for the next financial year’s business expenses in advance (before June 30, 2024) you can claim the cost in the current tax year. Examples of expenses you can prepay include rent, insurance premiums, licenses and subscriptions.

Hot Tip

Clear accounts payable before June 30. If you’re a cash-only business, you can only claim expenses that have been paid for in the current financial year. By paying all invoices before June 30, it will allow you to claim the expense in the present financial year. If accounts are settled after June 30, you won’t be able to claim tax on the expense until the end of the next financial year.

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2. Home office expenses:

If you operate your business from home, you can claim a portion of your household expenses as business expenses. This includes a portion of your rent or mortgage interest, utilities, internet bills and even depreciation on furniture and equipment used for business purposes.

To claim this deduction, you'll need to calculate the percentage of your home that is used for business and apply it to your total household expenses. Be sure to maintain sufficient evidence of every home office expense, including receipts, bills and invoices.

Note that if you claim home office expenses on your own home and receive rental income from your business, there may be capital gains tax (CGT) implications when you sell your home.  The CGT main residence exemption may not apply for that proportion of your home used for home office or business purposes, for the periods that you used it for your business. This would need to be considered when you sell your home and may give rise to a taxable capital gain. Ask your financial advisers to consider any potential CGT exposure.

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3. Professional development:

Investing in your skills and knowledge should benefit your business and, fortunately, the tax authorities recognise this, as costs associated with professional development are tax-deductible. This includes most or all expenses related to attending seminars, workshops, conferences and courses relevant to your industry. Subscriptions to professional journals or memberships in industry associations can also be claimed as business expenses.

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4. Bad debts:

‍Unfortunately, not all invoices are paid on time, and some may never be paid at all. The silver lining is that you can claim a tax deduction for bad debts, provided you have taken reasonable steps to recover the money owed. These might include sending reminders, issuing formal demand letters or pursuing legal action. Once you've determined that a debt is genuinely uncollectible, you can write it off as a business expense.

Hot Tip

If your business struggles with seasonal fluctuations you can read our article Seven Tips for Navigating Seasonal Fluctuations in Business for ideas to help you manage.

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5. Stock losses:

‍Any stock that is unsellable because it’s damaged, stolen or obsolete can be recorded as an inventory write-off prior to June 30. An inventory write-off is where the item is removed from stock-on-hand. Effectively, the stock no longer exists, thereby reducing your tax liability.

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6. Write off obsolete depreciating assets

Have your business assets changed this year? Review your fixed asset register against the physical assets of your business before June 30, as any depreciating assets that have become obsolete, damaged or no longer in use can be written off. Note: you’ll need to calculate any depreciation expenses up to the date that the asset is written-off.

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7. Instant asset write-off

The instant asset write-off is a powerful tool for small businesses looking to reduce their taxable income and boost cash flow. If your business (plus any business entities that are your affiliates or connected with you) have aggregated turnover of less than $10 million, you can immediately deduct the full cost of eligible assets costing less than $20,000—per asset.

This deduction applies to a wide range of depreciating assets, including tools and equipment, computers and tech, office furniture, and even motor vehicles. Provided the asset is used or installed and ready for use in your business by 30 June 2025, an immediate deduction for the business portion of the cost (up to the $20,000 threshold) can be claimed in this financial year.

Some key things to keep in mind:

The $20,000 limit applies on a per-asset basis, so multiple assets can be claimed separately if the cost of each individual asset is less than the $20,000 threshold. The full cost of an asset includes; the amount you paid for it, plus any additional amounts spent on transporting and installing it ready for use, plus amounts spent on improving the asset.

The IAWO is available for new and second-hand depreciating assets. For passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers, the claim is capped at the business- use percentage of the car limit ($69,674 for 2024–25). Assets over $20,000 need to be depreciated over time using the small business pool.

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Final word

As you prepare for the end of the financial year, it's worth taking advantage of all available deductions to minimise your tax liability and keep more of your hard-earned funds.  While many expenses may not seem significant in isolation, they can add up to substantial savings. Remember what they say: if you count the cents, the dollars will come.

Finally, to maximise your claimable expenses, understand that it is crucial to keep meticulous records and seek advice from a tax professional to ensure compliance with Australian taxation laws and regulations.

Please note: This article is for general information purposes only and is not meant to be tax advice. The information in this article was contributed by Lowe Lippmann Chartered Accountants. If you need assistance with your taxes, seek help from a finance professional. For more information about claiming expenses and reducing your tax payable, visit the Australian Taxation Office website.

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