Empower Your Business

Accounting is Just the Beginning

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The 10 Most Commonly Overlooked tax Deductions

Paying tax may be a necessary evil but why pay more than necessary?

  1. Use of home as Office. Whether you have business premises or not, you can still claim for some of your home expenses if you do some work at home and let’s face it, what business owners don’t these days? In addition, most claims for use of home are too timid e.g. not claiming for gardening expenses – it is a huge grey area!
  2. Home Telephone. If you make or take business calls at home, you can claim 50% of the line rental even if the business calls are way less.
  3. Interest Costs. Many business owners have home mortgages, loans or hire purchase debts yet no business borrowings, thereby voluntary giving up thousands and thousands in tax relief.
  4. Motoring Costs. FBT is nasty and can be considerable. Always consider the alternatives (such as mileage allowances) or if FBT is unavoidable, get an older car just for business purposes where the tax saved on the running expenses will greatly exceed the FBT on 20% of the cost. If you’re self-employed or in a partnership compare the tax deductibility of the mileage allowance against the total of depreciation and running costs – often, the mileage allowance is higher!
  5. Travel Costs. If the primary purpose of your trip is for business, and any holiday aspect incidental, then you would be able to claim 100% of the cost of the trip (providing you paid for the accommodation, food and any activity costs yourself on the non-business days).
  6. Donations. I still meet people who have not claimed rebates for school fee donations or child care. If you have not claimed in previous years you have four years to claim.
  7. Paying Family Members. If your kids or spouse work in your business make sure you are paying them for the work they carry out (a sole trader is a nuisance here as pre-approval from the IRD is required for wages to your spouse). If your spouse is a director but doesn’t do enough work in your business to justify a salary pay them a director’s fee for the risk involved in being a director.
  8. Incidentals such as newspapers, computers at home, subscriptions, magazines, club memberships can all add up.
  9. Guarantee Fees. If your spouse doesn’t work in the business and is not a director but nevertheless is guaranteeing borrowings or lines of credit, pay them a guarantee fee.
  10. Assets owned before going into business can be claimed on commencement of business and often give rise to large tax rebates. If you have a company you claim GST as well if they were not bought second-hand (there are some detailed rules here so ask first!).

As usual, seek advice on your specific circumstances to avoid disappointment!