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You can claim a deduction for most expenses you incur in running your business as long as they are directly related to earning your assessable income.Generally, working or operating expenses (such as office stationery and wages) can be claimed in the year you incur them. However, capital expenses (such as buying plant and equipment) are claimed over time.

When an expense is incurred depends on the accounting system you use. There are different rules for expenses you pay in advance (prepaid expenses).

Deductions for business

Most expenses you incur in running your business can be claimed as deductions to reduce your assessable income. The rules vary depending on the business structure you operate under and the nature of each expense.

Keeping good records

You must keep records of your business transactions, including expense claims, for five years after they are prepared or obtained, or the transactions completed, whichever occurs later. If you don't, your expense claim may be denied or reduced. You can store records in either paper or electronic form, but they must be readily accessible and available in English.

What you can claim and when

You can claim most expenses you incur in running your business as deductions to reduce your assessable income. As a general rule, you can claim your day-to-day business operating expenses in full, in the year you incur them. However, the costs of capital items (such as plant and equipment) are claimed over a number of years.

Motor vehicle expenses

The deductions you can claim for the business use of a motor vehicle depend on the business structure you operate under, the type of vehicle used, and whether you use it for private purposes. Our online calculator will help you work out your entitlement to a deduction.

Business travel expenses

To claim deductions for business travel, you need specific, documented evidence of the expenses.

Capital allowances and depreciating assets

Under the capital allowance rules, you can claim a deduction for the decline in value (or depreciation) of capital assets such as motor vehicles, furniture, and plant and equipment. Small businesses with turnover of less than $2 million can use simplified calculation methods.

Salary, wages and super

If you operate your business as a company or trust, you can claim a deduction for salary and wages paid to employees, and for super contributions you make to a complying super fund or retirement savings account for them. If you're self-employed, you can claim a deduction for your own super contributions in your personal tax return and for salary and wages you pay to other employees.

Losses

If you operate a business that makes a loss, you can carry forward that loss and may be able to claim a deduction for it in a future year. The rules differ for different business structures. If you're a sole trader or a partner in a partnership, you may be able to claim business losses by offsetting them against other income - for example, income you earn from salary or wages.

Home office expenses

If you run all or some of your business from home, you may be able to claim deductions for rent, rates, insurance and utilities. What you can claim depends on whether or not your home is your place of business and if you have an area set aside exclusively for business activities.

Repairs, maintenance and replacement expenses

You may be able to claim a deduction for repairs to machinery, tools or premises you use to produce business income, as long as the expenses are not capital expenses.

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If you’ve established a successful business that you’re looking to expand, you can consider franchising. If managed well, it can open your product or service to new markets and extend your brand’s reach.

Before you franchise your business, make sure you have a successful and proven franchise model. Operating your own franchise model before selling a franchise to someone else can help prove your concept, establish demand and create sound processes and systems that can be repeated in each new franchise.

There is no specific franchise registration or approval process, but establishing a franchise is a legal process and can take some time. It’s important that you plan thoroughly and seek professional advice from an accountant, solicitor or franchise consultant.

If you decide to franchise your business, it is vital that you have a good working relationship with the franchisees. It is important that you are careful to select a franchisee that is a good fit for your franchise business.
Work through the topics below to find out more about franchising your business:

1. Complying with the Franchising Code of Conduct | Franchising
2. Preparing your franchise agreement & manual | Franchising
3. Understanding your tax obligations | Franchising
4. Resolving franchising disputes | Franchising
5. Expanding your franchise overseas | Franchising

However, if you’re looking to start a business, buying into a franchise can be a good alternative to starting a unique venture. Similarly, if you’re planning to expand your business, a well managed franchising agreement can be an effective way of moving into new markets.

Franchising allows one business to operate under the trading name of another business' established brand and sell its products and/or services for a specified period.

Like any business decision, franchising must be considered carefully and the right processes should be followed. It’s important to also note that franchising is regulated by the Franchising Code of Conduct.

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Source: business.gov.au