One of the perks of being a sole trader, contractor or business owner is being able to claim tax deductions for business-related expenses, but many miss out on some of these simply because they are unaware of what they can and can’t claim. While many deductible business-related expenses are obvious, some can be a little more ambiguous. Say insurance premiums for example – did you know that these are tax deductible?
Sole trader tax
There are tons of business insurance policies that are tax deductible, but one thing’s important: your policy needs to be essential to earning assessable income for your premium to be tax-deductible. What policies are these? It could be public liability insurance, income protection insurance, loss of profit insurance, building and commercial motor vehicle insurance, or even a portion of your personal home and contents insurance.
Are income protection insurance premiums tax-deductible?
Income protection insurance premiums can be tax-deductible as long as a benefit payout on the policy is considered a taxable income. If not, it can’t be deducted from your personal or business income tax. Loss of income and inability to work are different and you can only claim if the expense is related to a loss of income. If you’re unsure whether your policy
can be claimed as an expense, chat with your Outside go-to and we’ll summarise the total annual amount you pay for premiums and see what portion of it is tax deductible.
Does your business have a star employee who can potentially cripple the business in case they vanish? Businesses with key employees who provide unique skill sets that are critical to the business can take out key-person insurance temporarily or permanently to protect them against the risk of that staff member suffering an illness, accident, or disability. Key-person insurance provides revenue replacement to protect the business from the resulting financial strain or affected profitability of losing a key employee. Premiums for this are tax-deductible unless the purpose of the policy is to cover capital losses from the loss of a key employee.
Motor vehicle insurance
Standard motor vehicle insurance policies typically don’t cover business use, so vehicle insurance premiums often can’t be claimed as a business-related expense. However, if your vehicle is used for business purposes, you might want to change or extend your standard vehicle policy to include business use. This way, you’ll be covered in case you need to make a claim on the policy while driving the vehicle for work (which would be covered as a tax-deductible business expense). All costs of a vehicle used solely for your business can be claimed, including commercial motor vehicle insurance premiums, maintenance, and fuel expenses.
As a small to medium business owner, you may not know what insurance premiums you can deduct from your annual income tax return. Your insurance broker will explain the different policy options for you that can minimise risk, including insurance cover to protect against business premises damage, audit insurance, loss of key staff member, loss of income through disability or death, loss of stock, or any other business lawsuit, however, it’s your accountant that can give you the inside scoop on whether you can claim these
against your taxable income.
Ask your accountant what other tax deductions you might be missing out on!
What other tax deductions are you missing out on? Give us a quick buzz and we’ll walk you through some tax saving hacks for your business that you’re probably unaware of!
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