As the 2021-2022 financial year draws to a close, salon owners are gearing up for tax time. The Australian Taxation Office (ATO) has shared a list of key items businesses can mark as assessable income streams. Some items are also considered tax deductible. Read on for this year’s advice.
Business income and deductions
Most income you receive from carrying on your business is assessable for income tax purposes. Assessable income includes the gross income your business receives from everyday business activities and all other business income that’s not part of your everyday activities.
Assessable income can include:
- cash income
- recovered bad debts for which you previously claimed a tax deduction
- government payments (although some government payments are not assessable if eligibility criteria are met)
- personal services income.
On the flip side, business expenses can be used to reduce your taxable income when:
- they are directly related to earning your assessable income
- you only claim the portion used for your business, if the expense is for a mix of business and private use, and
- you have records to show you incurred the expense.
Business expenses are deducted from your business’s assessable income, and as a result, reduce the amount of tax you pay.
Common business expenses can include:
- a portion of your home-based business expenses such as heating, cooling, lighting, and cleaning costs
- other expenses such as hand sanitiser, sneeze or cough guards, and cleaning supplies.
You can also contact your registered tax agent for more information tailored to your circumstances.
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