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Two income tax simplification measures are available which reduce the administrative and regulatory burden on small unincorporated businesses. The provisions remove the need to capture and retain certain information that would ordinarily be required for those operating a business, thereby saving time and expenses in complying with the tax legislation.

These two measures are:

1. •

   a simplified basis for calculating taxable profits (which applies to unincorporated businesses) known as the cash basis, and

2. •

   fixed rate deductions for certain expenses rather than calculating the actual amounts (eg business use of car, business use of home, subsistence)

FA 2013, Schs 4, 5

This guidance note is an overview of the fixed rate deduction for expenses. For information on the cash basis, see the Cash basis ― overview guidance note.

Despite the administrative benefits, claiming fixed rate deductions may not always produce the most tax efficient result. Careful analysis should be carried out for each trade in question, and some of the points to consider are set out below.