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NickHumphries, post: 87618 wrote:
I do the same thing, outsourcing my work. Since I am young and am new to deductions, how exactly does it work?

I pay $200 for someone to make the website. How much of that $200 do I get back from the ATO?

Or lets say I buy a new iphone, can I claim the cost of that phone and it’s plan as I have a business?


It is not a question of getting anything back from the ATO. The ATO don’t give anything back unless they have been over paid.

When you spend money in the course of your business this reduces the profits of the entity. Therefore the tax liability is less because your profits are less. How much less money you are liable to hand over depends on a whole load of things like how much you have earned, whether you are company, business, partnership, etc. and many other things relating to your individual situation.

So the answer to your question is you can claim all of a genuine business expense against what ever tax you would otherwise be liable for. A genuine business expense is something that you are only paying for to enable you to run your business and is not giving you a personal benefit.

So your business website is fully tax deductible as a business expense.

If you are a sole trader then the saving you will make is equivalent to your top income tax percentage. ie your total income for the year is $60k, tax rate= 30%. Therefore the real cost of your web site to you is $140. Now this does not mean the ATO gives you $60 back towards your web site. It means that you have reduced your liabitiy on your next tax return in a year so by $60. If you don’t make a profit the web site will have cost you $200.

Now it is more complicated than this and I am not an accountant, but for expenses under $1000 this gives you a rule of thumb.

Your iphone on the other hand could have a personal use element, that is it is not a clear cut business expense. This I would talk to your accountant about.