Year End Tax Deductions Checklist
Leading up to balance date it is worthwhile remembering that deductible expenses may be claimed in the year in which they are incurred (unconditionally contracted to purchase), even though payment may be made in the following year. Following are some special expenses which are either deductible in full or in part when they are incurred, but are related to the next income year.
The following expenses have no restrictions on the amount deductible:
- Stationery;
- Subscriptions to newspapers, journals, and other periodicals;
- Postage and courier costs;
- Rates;
- Road user charges; and
- Audit and accounting fees.
Advertising
Prepaid amount less than 6 months and under $12,000.
Bad Debts
To be deductible, bad debts must be written off during the income year. A mere provision or reserve is not deductible.
Consumables
Need not be taken into stock on hand if value is less than $58,000. Examples include fuel, fertiliser, feed, cleaning fluids, stationery.
Disability/Loss of Profit Insurance
Premiums are deductible in full where the taxpayers are in business on their own account, or are employees.
Discount Reserve
A deduction for a discount reserve, such as a prompt payment discount reserve, is allowed if debtors are entitled to this discount.
In the first year, a deduction of 2.5% of the debtors’ amount is allowed, and in subsequent years adjustments are made which maintain the discount level at 2.5% of the debtors’ amount. If a higher discount is generally given, this could be used instead of the 2.5%.
Equipment Service Contracts or Warranties
The full amount is deductible, provided it formed part of the consideration for the assets.
Holiday Pay
The amount accrued at balance date is deductible, if paid within 63 days of the balance date.
Prepaid Insurance Premiums
Where the total insurance expense in the year does not exceed $12,000, a 12-month prepayment is claimable.
Other Services
Prepaid amount less than 6 months and under $12,000.
Rent for Land and Buildings
Prepaid amount less than 6 months and under $23,000.
Repairs and Maintenance
Generally no deductions are allowed for a repairs and maintenance reserve, except for the periodic overhaul of business aircraft and the maintenance obligations of a construction firm under its building contracts.
Royalties
Royalties accrued to balance date are fully deductible.
Service or Maintenance Contracts
A prepayment of 3 months expenses is deductible, provided the total expense on the contract does not exceed $23,000 in the income year.
Subscriptions for Trade Professional Associations
A prepayment of 12 months is deductible provided the total amount for that association in the year does not exceed $6,000.
Telephone and other Communication Equipment Expenses
A prepayment of 2 months is deductible.
Travel and Accommodation Expenses
Prepaid amount less than 6 months and under $12,000.
