The ability to claim a deduction for amounts paid depend on a number of income tax principles. What can be claimed as a tax deduction depends on whether the payment is classed as an expense or an asset, and whether it is related to running a business or is private in nature.

Where a payment is made for something that is a mixture of business and private use, the tax deduction is limited to the business portion. For example a motor vehicle used 80 per cent of the time business purposes, 80 per cent of the running costs can be claimed, and 80 per cent can be claimed of the depreciation of the capital cost of the motor vehicle.

The test that decides whether a payment is either an expense or an asset is based on whether the item is used in the production of income, such as a stock item that is sold, or whether the payment is for an asset that has a useful life of more than 12 months.

Up until June 30, 2018 ,small businesses can claim a tax deduction for assets costing up to $20,000, while assets costing over $19,999 are written off over their estimated useful life. Businesses can use an expected useful life they calculate, or they can use the tax office’s estimated useful life of assets.

Q. I currently operate a proprietary limited company from a residential premise where I pay a rent in cash and receive a tax invoice from the property owner. Is this legal? I have just payed for the installation of solar panels; in exchange my rent has remained the same, instead of being increased as would normally happen. Can I claim the cost of the materials and labour?