Teabags, Toilet Paper & Tax
Over the years, I’ve peppered my accountant with (mostly outrageous) questions about what I can legally claim against my business income to minimise my tax. My learnings are summarised below.
With any luck, you’ll spot something you haven’t considered. Even better, you’ll table things I’ve missed. If we all contribute, we’ll create a comprehensive list of deductibles to make everyone’s New Year happier!
- Milk.
- Tea.
- Coffee.
- Jarrah Chocolatté rich creamy triple-choc fudge explosion (reserved for executive managers).
- Sugar.
- Biscuits (for visiting clients).
- Toilet paper.
- Soap.
- Tissues (for crying over bad debts).
- Cleaning products (including fabric softener, for washing tea towels).
- First aid supplies (e.g. disinfectant and bandaids, for nasty paper cuts).
As Fonnie and I are the only staff based at Empire House, I’m very careful to make reasonable, proportional claims. I operate as if a Tax Officer is peering over my shoulder. I’m sure it’s only a matter of time!
My second favourite category is Utilities (water, gas, electricity, rates and telephone). One of the few benefits of working in a 4 x 22 m cottage is that I can claim a third of these expenses, rather than the usual fifth or sixth. If you’re based in a flat, you may be able to do likewise.
Claiming part of these bills reduces the sting of paying them. I was even able to claim a third of my new hot water service. The same would’ve applied had I installed a solar power system this financial year. What a shame the government just torpedoed that initiative!
Claiming items bought solely for your office is also fun. If you’re going to spend 8-14 hours of every day in one room, you might as well make it nice. Claiming makes it less daunting to buy attractive, high quality items like rugs and ergonomic desks and chairs. Lesser office items include lamps, globes, power boards and wastepaper baskets.
When I had my front door rehung due to the drought, some of the cost was claimable (as it formed part of my client reception area). The same applied to my new doormat and sensor light. I was even able to claim my Eckhart Tolle ticket, as it partly inspired one of my blog posts.
All you need is a keen eye, a rabid desire to maximise your tax return and a very patient accountant.
I fully believe in paying tax to fund the government infrastructure and services I enjoy. I simply don’t want to pay more than I must.
So, what ideas can YOU contribute to line our pockets and make us smile?
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A quick myBRC plug…if anyone is looking for free EOFY advice, we have Chartered Accountant Joe Kaleb online from 4pm (AEST) this afternoon taking EOFY tax questions.
Thanks, Megan. Could you please ask Joe about Iced Vo Vos? Just how many is TOO many?
Fabulous post Paul. I teach meditation so I can claim herbal tea, candles and relaxing CDs which is nice.
And I’ve just had a new desk built in my front room which I’ve been waiting on for years. The wait was worth it because now there’s the asset rebate which makes it even more tax effective!
Nice work, Kate; thank you for calling in!
Another excellent post Paul. Many thanks as ever. The world’s highest taxing countries (in Scandinavia generally) have the best social services and happiest folk. The more economically individualist nations (generally lower taxing, like the US, Australia and the UK) have worse social services and not-as-happy folk. In case anyone thinks I’m making this up, read, for example, Common Wealth (Sachs), The Globalisation of Poverty (Choussadovsky) or One World (Singer). In other words, I agree with you that tax is a good thing. And as a small business, you’re wise to contribute your right whack. A good discussion to have all round. On another note, I neglected the Tax Man (or Woman) for several years and now we’re engaged in a delicate, extended pas de deux. I shall claim said tissues.
Thank you, Adam, for lifting the tenor from the toilet and revealing your insight and personal situation. Comments of this calibre should be fired round the world.
PS: I can recommend Sorbent Thick & Large tissues for losses exceeding $800.
For losses exceeding $800, I invoke continence pads. (Oh, it seems we’re back to scatology. Sorry.)
Speaking of tax, I just got this email from someone claiming to be the ATO:
‘You have get a Tax Refund on your Visa or MasterCard.
Complete the formular, and get your Tax Refund.
(Your Refund Amount Is 250.50 AUD)
Complete Formular’
Apart from the poor spelling and the fact that I’ve not done my tax yet, I know this to be a scam from the warning on the real ATO’s website at:
http://www.itnews.com.au/News/132378,ato-warning-on-refund-email-scam.aspx
You have been warned!
Not quite what you’re after Paul, but I have a pointer about what not to claim. I’ve known many people who’ve been stung by not being eligible to claim for self-education under the ‘point-too-soon’ principle.
For example, before going out and spending $5000 on an IT course because you are sick of concreting for a living, make sure you know about this.
See http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR989/nat/ato/00001 for the relevant info.
Thanks, Stephen. It sure is tempting to go nuts when you’ve outlayed your loot. That link you provided certainly gives pause for thought.
I used to have a lot of comments on tax but promised Paul and Adam not to say anything about it. Like all things there is a balance between fair and equitable claims that are legal and those that are dodgy.
I agree with claiming all you can within the bounds of the law as that is just good business.
Equity for all comrades.
Good one, Malcolm. We march tonight! Don’t forget to bring that red flag you got off ebay…
Mixing home and work can certainly deliver tax benefits – just look at all of the technology you need to run your business, that also gets used for eBay, the kids etc etc.
Just be careful that you sit on the right side of the fence and dont chop and change to suit your mood. In particular, this includes rules on software licensing. If you want to claim tax breaks for your ‘business’ computer, you can’t expect to also use software that is ‘free for personal use only’. This includes many free security/anti-virus software products.
Dear Sonia, I’m afraid I lost you there. How can using free versions of SpyBot, AdAware and AVG AntiVirus (which I consider perfectly suitable) queer the pitch? Could you perhaps explain what you mean by ‘tax breaks’?
Just saying that you can’t expect to have it both ways. If you are using a computer for business use, and claiming at as a business asset/getting a tax deduction, then I don’t think it’s fair to run software on it which is ‘not for commercial use’. AVG Free is a classic example (AVG Anti-Virus Free Edition is for private, non-commercial, single home computer use only. The use of AVG Anti-Virus Free Edition within any organization or for commercial purposes is strictly prohibited).
The question is are you a business or aren’t you? Certainly take advantage of the fact that you can be compensated (by tax deductions) for the fact that your business at home is incurring operational costs (e.g. a bigger home electricity bill), but then you shouldn’t be applying free ‘for home use’ stuff to your business.
Thanks, Sonia. That has certainly got me thinking! I thought that, like ID’s Doom and Acrobat’s Reader, AVG’s free version was a calling card with an option to trade up. I’ve read that this method of distribution, once revolutionary, is now common due to its proven success in creating and educating markets.
It’s a completely new thought to me that free software comes with the moral obligation you describe. And as a moral sort of chap, I’m surprised I don’t feel like rushing out and buying full versions of all my freeware.
Certainly the words you use ring with official authenticity, which brings me to another question: Should I always read those reams of terms and conditions before checking the ‘I agree’ box and downloading? Doing so seems more trouble than it’s worth. But perhaps I’m being foolish. What say you?
Oh Paul, don’t get me started on reading Terms and Conditions, especially with free software!
Read one of my blog entries for an example of the gems that can be hidden amongst all those words, that you are agreeing to:
http://ctaspley.wordpress.com/2009/04/01/support-on-click-aka-reading-the-fine-print/
This includes agreeing that any of your information is not confidential, and that they can pass on your information to their partners. And you’ve just agree to this.
It all comes down to the individual intent of the piece of free software. Some are ‘capability-limited’ versions of the full thing, to get you enticed to upgrade, but many of these free versions are not licensed for business use.
Struth, Sonia! Even the T&C excerpts in your article were enough to make my head spin! ‘Free’ doesn’t really mean that any more, does it?
Sometimes it does, but unfortunately some people take advantage of our love of ‘free’ for their own benefit – nowhere moreso than on the Internet!
My accountant told me about a client of his with a home office who deducted all the home’s toilet paper as a taxable expense. When he got audited by the Canada Revenue Agency and they said he could only claim part of it, he said: “But I only go at work.”
He got the deduction.
Dear Silvia, I’m so pleased you accepted my invitation to repeat your Twitter comment here. Stories like this are gold.
I was most impressed with your blog post on practical ways to show support for the Iranian people. I encourage those of our readers who are democratically inclined to check it out. Best regards and thanks again!
I’ve been involved in taxes for longer then I care to admit, both on the personal side (all my working life!!) and from a legal standpoint since passing the bar and pursuing tax law. I’ve provided a lot of advice and righted a lot of wrongs, and I must say that what you’ve posted makes perfect sense. Please keep up the good work – the more people know the better they’ll be equipped to deal with the tax man, and that’s what it’s all about.
Thanks very much, BIT. It’s great to get your professional endorsement of our discussion. Come back soon!