Changes to small business deductions this tax time

If you’re a small business owner who operates from home or you use a vehicle for business purposes, you need to be aware of some changes when claiming deductions this tax time.

Cents per kilometre method

The cents per kilometre method for claiming car expenses increased from 72 to 78 cents per kilometre in the 2022–23 income year.

You can use this method if you’re a sole trader or in a partnership – where at least one partner is an individual. This method is based on a set rate for each kilometre you travel for work-related use and allows you to claim a maximum of 5,000 kilometres per car, each year.

If you use this method, the 78 cent per kilometre rate covers all your vehicle running expenses including registration, fuel, servicing, insurance, and depreciation. You can’t claim these costs separately.

Car limit for business owners

The car limit has also increased, to $64,741 for the 2022–23 income year. The car limit is the maximum value you can use to work out the depreciation of passenger vehicles designed to carry a load of less than one tonne and fewer than 9 passengers. This excludes motorcycles or similar vehicles.

Work from home business expenses

Do you operate your business from home, even some of the time?

For the 2022–23 income year, the fixed rate method increased from 52 cents to 67 cents per hour worked from home and no longer requires you to have a dedicated home office space.

The fixed rate method covers your electricity, gas, stationery, computer consumables, internet, and phone usage. You can also claim separate deductions for expenses not included in the hourly rate, like the decline in value of depreciating assets – such as your laptop or office furniture.

The records you need to keep for your work from home deductions have also changed.

Remember, registered tax and BAS agents can help with your tax.


Last modified: 13 Jul 2023    QC 73027


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