Running a business involves plenty of challenges, especially when it comes to your tax obligations. You want to maximise profit while minimising your tax liabilities. One way to do this is with business expenses that are considered a tax deduction. This is because the Australian Government wants you to invest in your business, grow in size, employ more people and ultimately… pay more tax.
One of these smart investments into your business is your marketing. Good marketing should drive more customers to your business and bring you a return on your investment. On top of that, the ATO is potentially going to give you a tax break? Perfect.
There are lots of tax claims you may be able to make, from office and vehicle expenses to wages, travel, and operating costs. But did you know that marketing expenses are also tax-deductible? Which means you can invest in your business while reducing your tax bill.
Let’s take a look at common marketing expenses that may be claimed as tax deductions and review the claiming process.
Marketing expenses as business tax deductions
Marketing is a key piece of the business puzzle regardless of your size or industry. Marketing includes a variety of promotional and sales activities, including digital marketing, traditional advertising and your website design, just to name a few.
As marketing is considered a common requirement of doing business and the costs directly relate to business income, the vast majority of marketing costs may be able to be claimed as tax deductions.
A few important things to remember is to always follow the Australian Taxation Office (ATO) requirements and make sure you are able to prove all costs through financial records.
The following marketing costs are small business tax deductions in Australia:
Website design and development
Every business needs a functional and well designed website.
Why? People search for products and services online before they make a purchase, with 63 percent of shopping occasions starting online.
On top of this, people also use the internet to research companies and buy goods directly, with the number of digital buyers reaching 2.14 billion in 2021.
Simple websites provide a powerful online presence, and e-commerce shopfronts allow you to operate online with very minimal overheads.
As a common and necessary business expense, costs associated with website design, development, and maintenance may be able to be deducted from your tax bill.
Build a new website and get in now before tax time.
Search engine optimisation (SEO)
SEO is known as ‘organic’ internet marketing because it allows you to improve your digital presence naturally without paying for ads.
When it’s done right, SEO can increase online traffic, boost visibility, and increase business revenue. SEO strategies can work locally, nationally, or globally based on the needs of your business.
It all starts with an SEO audit, followed by ongoing content creation, link building, conversion rate optimisation and so much more. SEO has initial setup and ongoing costs, all of which you may be able to claim as tax deductions when doing your business tax return.
Want to invest in SEO before tax time?
Google Ads and pay-per-click (PPC)
Along with SEO, businesses can also get involved with Google Ads and PPC campaigns.
With this powerful form of digital marketing, you can create ads based on specific keywords relevant to your business. Google Ads is the most popular PPC product on the internet, with ads displayed directly on search pages and relevant websites.
With a Google Ads campaign, you only pay when people click on your ads or buy your products. Like other marketing activities on this list, PPC products may be tax deductions for business owners.
Not sure where to start? Speak to a specialist digital marketing agency who will help you understand who your customer is, what key phrases they are searching for, and structure your Google Ads to get the best results.
Reach your customers with Google Ads today.
Social media advertising and marketing
Social media platforms are more popular than ever with 4.62 billion people worldwide now on social media, which makes them a great tool for marketing purposes.
Popular social media platforms for businesses such as Facebook, Instagram, Twitter, YouTube, and LinkedIn provide a range of opportunities for marketing and advertising.
These include cross-promotions and product placement. Social media marketing can be used to expand your reach and increase your sales.
As these costs are directly related to your business’ income, you may be able to claim marketing expenses associated with creating and maintaining social accounts for your business.
Unsure if social media is right for your business?
Whether it’s print publications, in-store promotions, or TV material, traditional advertising can get expensive fast. Regardless of the medium or the message, investing in traditional advertising is tax-deductible.
All of the costs you incur are business tax deductions, from hiring a designer and copywriter to paying for printing materials and marketing staff.
Long-term branding campaigns may fall into this category, along with paying for a marketing consultant.
Other marketing expenses and advertising costs that you may be able to claim as tax deductions include digital display advertising, directory listing fees, marketing agency expenses, plus more.
If unsure on what you can claim on your small business tax return, speak to a registered tax agent.
How do I claim tax deductions?
When tax time comes around, it’s important to be ready. Whilst you may be able to claim a huge range of marketing expenses, you need to understand your tax obligations and have your paperwork in order.
You should create a list of all your marketing expenses for the year, understand the difference between business and personal expenses, and decide whether to lodge your tax return directly or via an accountant.
Understand your tax obligations
Australian business taxes can be difficult to understand, with most businesses choosing to work with a professional accountant.
From company tax to capital gains tax (CGT) and goods and services tax (GST), there are lots of different taxation laws and provisions.
As a business owner, you can elect to make tax payments monthly, quarterly, or annually based on the specific needs of your business. Everything you need to know is available on the Australian Taxation Office (ATO) website.
Keep accurate records
When it comes to business expenses, it’s vital to keep accurate records. At a minimum, you need to list what each expense was for, how much it cost, and when it took place.
You may need to prove this information, so it’s critical to keep receipts, invoices, credit card details, and bank account statements.
Whenever you claim expenses, you need to hold these records for five years. While paper records are fine, business owners are advised to keep digital copies as a backup, with cloud-hosted data often the most secure.
Personal vs business expenses
While everything related to marketing your business is tax-deductible, the line between personal and business life is not always clear.
When an expense involves both your personal and business life, you can only claim for the work-related portion.
You can’t deduct costs for personal events or hobbies, even if they have promotion value. This includes hosting clients at a family function or attending sporting or entertainment events with your colleagues.
Individual lodging vs using a registered tax agent
When all your records are in place, you need to lodge your tax return. If you’re a sole trader, you can lodge your own small business tax return through the Australian Taxation Office myTax online portal (ATO’s myTax). This is very similar to lodging an individual tax return, but it includes a section for the cost of marketing and other work-related expenses.
If your tax deductions are more complex, simply hand over your documents and let a registered tax agent do the rest. While there’s a cost involved with this process, working with a professional accountant is the best way to avoid risk and minimise stress, plus it saves you the time and hassle.
Invest in digital marketing and claim it as a tax deduction
Whether you want to invest in SEO, social ads or Google Ads, or maybe you’re not too sure what method would suit your business – White Chalk Road has a team of digital marketing experts who are here to help.
If you want to grow your business with smart, results driven digital marketing strategies, Let’s chat!
Frequently asked questions
Marketing expenses are costs that are directly related to your business’ income, hence you may be able to claim marketing expenses as tax deductibles when it comes to tax time. We recommend you speak to your accountant or check out the Australian Taxation Office (ATO) website for more.
Marketing expenses such as digital marketing, website development, traditional marketing and more, may all be tax deductible. For more information, speak to your accountant.
When tax time comes around you should:
- Ensure you understand your tax obligations
- Keep accurate records of all your marketing expenses for the year
- Determine the amount spent for personal vs business
- Decide whether to lodge your tax return directly or via an accountant
This blog is intended to provide general information only and does not take into account your business objectives, financial situation or needs. You should seek independent, professional tax advice before making any decision based on this information. The Australian Taxation Office also has resources available at https://www.ato.gov.au/Business/.