From the ATO

Avoid the superguarantee charge (SGC) by paying your eligible employees’ super in full, ontime and to the correct fund. For Payday Super, this means contributions needto be received by, and can be allocated by, the super funds within 7 businessdays after payday (unless longer applies). Pay super on payday as you need toallow time for payment processing and any corrections to be made.

Tip - If you are unsure if your business is fully prepared for PaydaySuper, talk to your professional adviser.

If you are unsure if your business is fully prepared for PaydaySuper, talk to your professional adviser.

Business deductions

Your business canclaim a tax deduction for most expenses it incurs in carrying on the businessif they are directly related to earning assessable income.

There are threegolden rules for a valid business deduction:

• The expense must have been for your business, available as anallowable deduction and not for private use.
• If the expense is for a mix of business and private use, you canonly claim the portion that is used for your business.
• You must have records to prove it.

Types of businessexpenses that are generally deductible include:

• certain capital expenses, such as the cost of depreciating assetslike machinery and equipment used in your business;
• day-to-day operating expenses;
• purchases of products or services for your business.

You can alsoclaim deductions for expenses related to protecting staff from safety hazardsinvolved in performing their duties. For example, infection from transmissiblediseases. This may include hand sanitiser, sneeze or cough guards, face masks,gloves, other personal protective equipment, antibacterial wipes and othercleaning supplies that are used for business purposes.

The amount of thededuction and when it can be claimed will depend on:

• the type of expense (for example, certain capital expenditures aredeductible over time);
• whether it has any private or domestic purpose for which thededuction must be reduced.

The GST componentof expenses cannot be claimed as a deduction if it can be claimed as a GSTcredit on a business activity statement.

What you can't claim

There are someexpenses that are not deductible, such as:

•  entertainment expenses, other than those provided as anentertainment-related fringe benefit;
• traffic fines;
• private or domestic expenses, such as childcare fees or clothes;
• expenses relating to earning income that is not assessable;
• payments for which your business has not met its PAYG withholdingor reporting obligations;
• the GST component of a purchase if it can be claimed as an inputtax credit;
• general interest charge or shortfall interest charge incurred onor after 1 July 2025 – if you’re an entity with a substituted accountingperiod, these changes apply from your next accounting period starting after 1July 2025.

You generallycannot claim a deduction for the cost of capital assets that are dealt withunder the capital gains tax rules, such as the land your business premises areon. Some exceptions apply for capital works, plant and certain expenditure ofprimary producers on improvements to land.

If you earnpersonal services income (PSI) and the PSI rules apply, the PSI rules willlimit the deductions you can claim in relation to your PSI.

How to apportion expenses

You cannot claima deduction for an expense to the extent it is incurred for a private ordomestic purpose. Thus, if an expense only partly relates to running yourbusiness it will need to be apportioned between the deductible andnon-deductible amounts.

If you have ahome-based business and claim occupancy expenses, you will generally apportionthese based on floor area and the time your home is used in your business. Forrunning expenses, there is a variety of methods you may use depending on yourcircumstances.

There aredifferent methods you can use to calculate deductions for motor vehicleexpenses, depending on your business structure and the type of vehicle you areclaiming them for.

For otherexpenses, you will generally apportion based on the private and business use ofthe asset or service acquired. This must be done on a fair and reasonable basisthat reflects any private use of the asset or purpose of the expense.

You need to keeprecords to show how you have apportioned your expense. For example, if youincur an expense to repair your laptop which you only use for your business,you can claim a deduction for the full cost of the repair. However, if you usethe laptop 50% of the time for your business and 50% of the time for privateuse, you can only claim a deduction for 50% of the cost of the repair.

When the simplified depreciation rules apply

The simplifieddepreciation rules apply to small business entities (aggregated annual turnoverunder $10 million) that choose to use them.

The rules applyto most depreciating assets. These are assets that have a limited lifeexpectancy (effective life) and can reasonably be expected to decline in value(depreciate) over the time they are used.

Depreciatingassets include:

• computers, laptops and tablets;
• motor vehicles (for example, cars, vans and tractors);
• office equipment (for example, coffee machines);
• office furniture (freestanding);
• tools and equipment (for example, electric sanders and saws).

Excluded assets

A small number ofassets are specifically excluded from the simplified depreciation rules. Forthese assets, you must use the general depreciation rules for:

• assets that are leased out, or expected to be leased out, for morethan 50% of the time on a depreciating asset lease;
• assets used in your research and development (R&D) activities;
• assets you allocated to a low-value assets (pool) before using thesimplified depreciation rules;
• capital works, including buildings and structural improvementshorticultural plants, including grapevines;
• software allocated to a software development pool (but not othersoftware).

If you are aprimary producer, for some primary production assets you can use either thegeneral depreciation provisions, or the simplified depreciation rules.

Cost of asset

Under thesimplified depreciation rules (including instant asset write-off), the cost ofan asset includes both:

• the amount you paid for it; and
• any additional amounts you spent on transporting and installing itready for use.

The cost alsoincludes amounts you spent on improving, disposing of or permanently ceasinguse of the asset.

GST

Whether the goodsand services tax (GST) amount is excluded from the cost of your asset dependson whether you are registered for GST.

If your businessis:

• registered for GST and can claim the full GST credit – you excludethe GST amount paid on the asset when calculating the asset's cost. This isbecause you will claim a credit for the GST paid in the business activitystatement for the relevant period;
• not registered for GST – you include the GST amount paid on theasset when working out the asset's cost.

If only a portionof the GST credit can be claimed, then the cost is reduced by the portionclaimed.

Trade-ins

When yourbusiness trades-in a car or any other asset, the agreed price of the trade-inis usually deducted from the amount paid for the new asset. While the sale andpurchase may appear as one transaction, there are two transactions fordepreciation purposes:

• purchase of a new asset; and
• disposal of an existing asset.

If the cost ofthe new asset (including any amount credited for the trade-in) is equal to ormore than the relevant instant asset write-off limit ($20,000), it can't beimmediately written-off and must be added to the small business pool.

Example:trade-in asset depreciation

Marilyn has aceramic studio, that she runs as a sole trader and that qualifies as a smallbusiness. Marilyn trades-in her old car for $11,000 and buys a second-hand carat a cost of $25,000. Both cars are used 100% for business purposes.

For depreciationpurposes, there have been 2 transactions:

• purchase of the new car for $25,000; and
• sale of the existing car for $11,000.

Although only$14,000 out of pocket, Marilyn must add the car to the small business poolbecause it cost $25,000, which exceeds the relevant instant asset write-offlimit of $20,000.

Marilyn may needto adjust her small business pool balance or include an amount in herassessable income as a result of selling the old car.

Improvements to assets

Under thesimplified depreciation rules, improvements to assets are depreciated.

If theimprovement relates to an existing asset in the small business pool, you simplyadd the improvement cost to the pool as a cost addition amount. You also addcosts incurred when disposing of, or permanently ceasing to use, an asset tothe pool as a cost addition amount.

The amount of anycost addition that can be claimed is limited to the business use proportion(taxable purpose proportion) of the original asset. This is the portion used toearn assessable income.

If your businesshas a cost addition for an asset that has been written-off under the instantasset write-off rules in a previous income year, you can immediately deduct thecost addition amount under the instant-asset write off rules if:

• it is the first deductible cost addition amount incurred after theend of the income year in which the asset was written off;
•  the cost addition amount is less than the instant asset write-offlimit for the income year.

Any subsequentcost addition amounts can't be immediately deducted – instead they are placedinto the small business pool.

Business versus private use

The amount of anasset's cost that can be claimed as a depreciation deduction is determined byhow much the asset is used for business purposes (taxable purposes).

To work out ifyou can immediately deduct the cost of a depreciating asset or cost additionunder instant asset write-off, you must consider whether the full cost of theasset or cost addition is less than the relevant limit. However, thedepreciation deduction is limited to the percentage the asset is used forbusiness purposes. You can't claim a deduction for the portion of the assetused for private purposes.

Changes in business use

You must reviewhow much an asset is used for business and other taxable purposes in each ofthe first 3 years after the year the asset was added to the small businesspool.

If this taxableuse proportion changes by more than 10% from the most recent estimate, you mustmake an adjustment. The adjustment is made to the opening pool balance of thesmall business pool containing the asset and must be made before you work outthe small business pool deductions for the year.

Instant asset write-off

The threshold forthe instant asset write-off is $20,000. As reported in the Budget edition ofTaxWise, the $20,000 threshold is to be made permanent.