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Strangest tax deductions the ATO will allow Posted on October 9, 2018
Xboxes, dogs and pedicures might sound like strange tax deductions for small businesses, but for the right sort of business they’re perfectly legal.
Now that the 2015 tax year has ceased, small business owners are turning their minds to deductions. The introduction of the $20,000 depreciation tax concession in the federal budget has sharpened the focus on what’s allowable and what’s not.
Here are some odd tax deductions:
Art gallery owners have rushed to persuade small business owners to buy artworks since the $20,000 depreciation concession was introduced. Paintings are actually allowable deductions, but are deductible only if they’re used to decorate the business. Business owners need to be careful to ensure that it is artwork in the business premises and doesn’t find its way into a personal premises.
Many people are buying prefabricated studios to put in their backyards and deducting them from their tax. These often cost less than $20,000 so are eligible for the depreciation concession, though they can also cost a lot more.
If you originally had your business operating from home, you could move it into the back yard as opposed to the lounge room or the study. But buyers have to be cautious that the studios aren’t more like granny flats, with a bathroom and bedroom, otherwise, the tax office could come in and deny the deduction.
Food and wine
Small business owners can deduct the cost of their meals and alcohol when they’re travelling for work and stay away overnight. It just all about trying to keep the receipts and invoices!
There’s no particular distance that business owners have to travel away from home to claim the deductions – it just needs to be impractical to get home.
If you have a guard dog, you can deduct its food and vet bills. “Its the same principle as cattle dogs for farmers that are working animals – you might even take the dog home on weekends to be with your family.
But the dog can’t just be a family pet. And sorry – there’s no such thing as a guard cat!
Sunscreen, hats and makeup
Business owners who work outdoors, such as gardeners or builders, can get a tax deduction for sunscreen, hats and sunglasses. These deductions were allowed only after court challenges to the ATO by outdoor workers.
The Australian Tax Office has recently confirmed that small businesses would be able to deduct ping-pong tables if used in the business but a whole range of employee entertainment expenses are deductible.
The workplace has changed dramatically over the past few years, with dart boards, Xboxes and Foxtel subscriptions being allowable as a means of getting people refocused and giving them a bit of downtime in the workplace. The Tax Office has acknowledged that.
Knives and pedicures
The general principle with tax deductions is that the item is allowable as long as the expense is incurred in earning assessable income. You may need to defend it at some point of time, but if you can justify the expense then the answer is you would probably get it across the line.
This opens the way for deductions that might at first sight seem unusual, but make sense in context. A knife swallower would be able to deduct their knives and a hand model could deduct the cost of pedicures.
For example, if an executive assistant tried to claim make-up, colours and brushes, they wouldn’t be able to. But if you’re preparing deceased bodies for a funeral service then of course all those sorts of things would be deductible.