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Scissor cutting tax

How to reduce your tax bill

Many of the business expenses you face can be deducted from your income when calculating your tax bill. Here are some steps you might be able to take to reduce the amount of tax you need to pay.

File and pay on time: This avoids any risk of having to pay interest or penalties.

Scissor cutting taxClaim for Valid Expenses: At tax time, your total profit (the amount you need to pay tax on) is your income minus the expenses you can claim — so the more you can claim, the less tax you have to pay.

What to do

  • Keep all expense receipts and invoices you receive.
  • Try to pay for anything that could be a claimable business expense through your business account, so you’ve got a paper (and electronic) trail.
  • Keep records of all your expenses — you have to keep these records for seven years.
  • You’ll claim your expenses as part of your tax return by entering totals into the relevant boxes. You don’t need to provide the receipts with your return, but you need them on hand if IR wants to see them.

tip Make sure you only claim business expenses — not personal ones — and keep good records of what you spent the money on for your business.

Claim for any valid depreciable assetsDepreciation is a way of claiming back some money on assets you buy for your business, like computers, vehicles or machinery. You claim for the amount it depreciates each year — that is, the value lost through wear and tear or becoming out of date.

What to do

  • Keep all receipts and invoices related to any depreciable assets.
  • Keep an accurate record of your fixed assets, the depreciation claimed and the adjusted tax value of each asset — keep these records for 7 years.
  • You’ll claim for depreciation as part of your end-of-year tax return.

Claim for charitable donationsIf your business makes a charitable donation, you can deduct the amount of the donation from your income.

What to do

  • Keep any tax receipts and invoices for donations you make over $5.
  • Claim back the tax at the end of the tax year — this is a separate claim to your income tax return.