Many small business owners unknowingly miss out on tax deductions, leaving money on the table. Every dollar saved is a dollar reinvested. From home office expenses to depreciation and loan interest, knowing what you can claim can reduce taxable income and improve cash flow.
This guide covers key deductions you might be overlooking, helping you keep more of your hard-earned money where it belongs: in your business.
1. Home Office Expenses
If you operate your business from home, you may be able to claim a portion of your household expenses. These include:
- Rent or mortgage interest
- Electricity and water bills
- Internet and phone costs
- Council rates and insurance
The claimable amount is based on the proportion of your home used for business purposes. Keeping clear records and calculations will ensure compliance with Inland Revenue requirements.
2. Motor Vehicle Expenses
Business owners using personal vehicles for work-related travel can claim deductions for costs such as:
- Fuel
- Maintenance and repairs
- Insurance
- Depreciation
- Loan interest (if applicable)
There are two methods for claiming vehicle expenses:
- Actual costs method: Requires keeping records of all expenses and apportioning them based on business use.
- Kilometre rate method: Applies a set per-kilometre rate for business travel, simplifying calculations.
3. Business-Related Software and Subscriptions
Many businesses forget to claim software subscriptions essential for daily operations. These may include:
- Accounting software
- Cloud storage services
- Marketing and CRM tools
- Industry-specific software
4. Prepaid Expenses
Certain expenses paid in advance, such as rent, insurance, and subscriptions, may be deductible even if they relate to future periods. Businesses should review their accounts to ensure these costs are accounted for in their tax returns.
5. Training and Professional Development
Investing in business skills and employee development can be deductible, including:
- Industry-related courses and workshops
- Books and online training materials
- Webinars and certifications
These costs must directly relate to the business and contribute to skill enhancement.
6. Bad Debts
Unpaid invoices from customers that have been written off as bad debts can be claimed as deductions. The debt must be physically written off in the business’s accounts before the end of the financial year to qualify.
7. Entertainment Expenses (Partial Deduction)
Entertainment expenses are deductible under specific conditions:
- 50% deductible: Client meals, staff functions, and corporate gifts with entertainment value (e.g., wine, restaurant vouchers).
- 100% deductible: Light refreshments at training events, promotional events for the general public, and overseas business-related entertainment.
8. Interest on Business Loans
Interest on loans taken for business purposes is tax-deductible, while principal repayments are not. Maintaining separate business loan accounts ensures accurate tracking of deductions.
9. Depreciation on Business Assets
Assets like computers, office furniture, tools, and company vehicles lose value over time. Businesses can claim depreciation to account for this decline, spreading costs over multiple years.
10. Income Protection and Business Insurance
Premiums paid for business-related insurance policies may be deductible, including:
- Public liability insurance
- Professional indemnity insurance
- Income protection insurance (if structured correctly)
11. Wages Paid to Family Members
Paying reasonable wages to family members working in the business is deductible, provided it reflects fair market rates and is documented appropriately.
12. Marketing and Advertising
Advertising and promotional expenses aimed at generating revenue are fully deductible. These include:
- Website development and hosting
- Social media and Google Ads
- Business cards and printed marketing materials
13. ACC Levies
Employers and self-employed individuals can claim ACC levies as a business expense, reducing their tax liabilities.
14. Legal and Accounting Fees
Professional fees paid for business advice, compliance, and tax planning are deductible. This includes GST advisory services, contract reviews, and legal consulting.
15. Gifts to Clients or Suppliers
Business-related gifts may be deductible based on their nature:
- 50% deductible: Gifts with an entertainment component (e.g., food, wine, event tickets).
- 100% deductible: Non-entertainment business gifts such as branded merchandise or office supplies.
Final Tip: Maintain Accurate Records
To maximise deductions and ensure compliance with tax laws, businesses must keep detailed records of:
- Invoices and receipts
- Mileage logs for business-related vehicle use
- Business-related transactions
- Depreciation schedules
By taking advantage of these commonly overlooked deductions, small businesses can significantly improve their financial health and reinvest savings into business growth. If you need personalised tax advice tailored to your industry and business structure, consult a professional accountant to optimise your tax strategy.
The content in this blog is intended to provide general insights and should not be regarded as professional advice. Each business situation is unique, and we recommend consulting with a professional for specific guidance. At Black Arrow Business Studio, we specialise in accounting and consulting services designed to support your business’s growth and success. Feel free to contact us for expert advice and customised solutions.
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