How claiming expenses can lower your tax bill

At a time where cashflow is tight and the economic outlook is less than rosy, it’s important to look for any possible way of saving money and reducing your tax bill.

Claiming your business expenses is one way to put money back in the kitty

Why claim against your small business expenses?

It doesn’t matter if you're a limited company or sole trader, you have the option to claim your business expenses back annually in your tax return to the Inland Revenue.

Viable operational expenses are deducted from your business earnings over the course of the year, reducing what’s known as your ‘taxable income’. In essence, you reduce the amount of income you must pay tax on, cutting your tax bill and bringing money back into the business.

What expenses can you claim?

Many of your business and operational expenses will be tax deductible

Here’s a breakdown of what you claim:

• Vehicle expenses, transport costs and travel for business purposes
• Rent paid on business premises
• Depreciation on items like computers and office furniture
• Interest on borrowing money for the business
• Some insurance premiums
• Work-related journals and magazines
• Membership of professional associations
• Home office expenses
• Work-related mobile phones and phone bills
• Stationery
• Work uniforms
• Tax agent’s fees.

If you own an investment property, expenses you can claim for include:

• Repairs and maintenance (but not renovations that substantially improve the value of the property)
• Professional services fees, like accountants, lawyers or property managers
• rates and insurance
• Mortgage repayment insurance
• Vehicle and travel expenses when you travel to inspect your property or do repairs
• depreciation on capital expenses, like whiteware, appliances or heat pumps
• Legal fees involved in buying a rental property, as long as the expense is $10,000 or less.

How do you make a claim?

To claim an expense, you must have a record of that expense, eg a receipt, or Inland Revenue may not allow the expense to be claimed.

Your business accounts will be submitted at the close of the financial year. These will include all income and expenses you’ve incurred over the year, including records of all your expenses.

To claim against any eligible expenses, you’ll need a copy of a receipt for the purchase. When you file your tax return, you’ll either copy your income and expenses into your financial statements summary (IR10), or send Inland Revenue a summary of your accounts.

It’s good practice to partner with an accountant or bookkeeper, and to use the latest cloud accounting software so you have all the data needed to make your expense claims.

Talk to us about improving your expense management

Claiming back your business expenses is a simple way to cut your taxable income and reduce your overall tax costs – a move that can be a major boost for your cashflow. We can help improve your expense management, setting up the best accounting systems and claiming back all eligible expenses.