Generally deductions for business related expenses such as start up costs, business restructuring, the costs of defending against a takeover and the costs of ceasing business are eligible for deduction over a 5 year period.

However, as of 1 July 2015 the Government has announced that Small Business Entities (SBE) may be eligible for immediate deductions of certain expenses associated with starting up a new small business. Deductions may be applicable to expenses incurred in seeking advice or services from professionals such as accountants and lawyers or fees paid to government bodies (for example ASIC).

An entity may only clam these expenses as a deduction in the year in which they are incurred. Individual tax payers operating as either a sole trader or as a partnership may be eligible to defer deductions to a later income year.

Advice or services that are immediately deductable include those that may be incurred through seeking advice from a lawyer or accountant.  These costs must be in relation to

  • The structure of the business including advice on the most appropriate structure
  • Setting up legal arrangements or business systems for the proposed structure
  • The operation of the proposed business and development of a business plan
  • Raising capital for operation of the proposed business

However, the new deductibility rules do not apply to the cost of assets that may be used by the business, direct costs of capital such as interest and loan repayments or expenses incurred for the operation of a proposed business.

Payments to Australian government agencies in relation to setting up a SBE are also eligible for immediate deduction if relates to

  • creating an entity that may operate the business
  • costs associated with transferring assets to the entity (eg stamp duty)

If you need help in understanding these changes, please contact one of our tax accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry.