”Write it off!” What does this mean and what can you write off anyway?
EPISODE 59
Notes
We hear the term “write it off” thrown around a lot but I think many business owners don’t really understand what legitimate tax write-offs are. There is a lot of confusion around the scope of what you can write off in your business so in this episode, I want to share some clarity on the subject.
For the most part, I think business owners are overly optimistic about what a legitimate business expense is. Many business owners confuse personal expenses with items that can be claimed as tax deductions in their business. But as a business owner, it’s really important that you understand the difference.
Today, I’m sharing some practical examples of things I often see in my work as a bookkeeper and some insights on what you can put through your business account.
I give an overview on:
What writing off an expense through your business actually means.
Purchasing upfront through Profit and Loss and depreciation methods.
The benefits of tax deductions and why a lot of business owners are optimistic about what the benefits are.
What legitimate business expenses are. You can only claim a tax deduction for an expense that needs to be incurred to earn your accessible income.
Expenses I often see in my bookkeeping work that aren’t legitimate tax deductible expenses.
At the end of the day, common sense prevails most of the time. Always ask yourself, “do I need to incur this expense to earn my accessible income?” If the answer is yes, it’s likely that it’s a legitimate business expense.
If the answer is no, you’re probably looking at a personal expense which cannot be claimed as a tax deduction.
I hope this episode gives you clarity on the topic of tax deductions and gives you an understanding of what you can and cannot “write off” in your business.
LINKS:
Previous episode mentioned:
Bookkeeping for Christmas parties, Christmas gifts and entertainment expense
https://www.youtube.com/watch?v=hg1Uk60rBsc
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About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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