SMALL BUSINESS GROWTH   |   4 minute read

Small business tax deductions and other end-of-financial-year sales cost-saving tips

Aside from the seemingly endless list of end-of-financial-year sales and deals, there are plenty of smart ways that small businesses can save money when tax time rolls around.

Get the most out of your tax return with these small business tax deductions and financial year-end cost-saving measures.

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1. Investigate tax deductions for small business owners

There’s a long list of acceptable tax deductions for small business owners that can easily be overlooked if you’re not well versed in tax for business. Some common deductions include:

Home office/co-working space deductions

If you run your business from home, it’s likely that you will qualify for home office deductions. This means you can reduce your tax liability by claiming expenses like utilities and office supplies.

There are certain requirements for having a home office:

  • You need to have an area of your home used only for business activities
  • Your work area must be your principal place of business (and you should be ready to prove this with a consistent schedule)
  • The majority of the time you spend in your home-work area must be devoted to doing business

The exact expenses you can claim depend on the nature of your business, your home office set up, and your necessary equipment, so do some research to find out what applies to you.

Likewise, if you rent a co-working space where you contribute to the cost of utilities and supplies, there’s a good chance those costs will be tax deductible. An accountant or financial adviser can provide guidance on your specific circumstances.

Banking & insurance fee deductions

If you have a business credit card or a small business loan, the amount you pay in interest during the financial year should be tax deductible. The same applies to fees charged by your bank for maintaining or using a dedicated business account. Insurance coverage such as rental insurance, liability insurance, and workers’ compensation insurance is also tax deductible.

Bookkeeper, accountant, tax consultant & legal fee deductions

If you engage a professional to help with filing your tax return, you can claim a deduction for the cost of hiring them. This is known as a “professional services” deduction, and it also applies to lawyers and other professionals whose services you employ for business purposes.

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2.  E-file your tax return

Gone are the days when filing a small business tax return meant sorting through mountains of paperwork and mailing in forms. Depending on where you’re filing your tax return, you should be able to access either a government-provided electronic tax-filing system or utilize third-party software to organize your return. Filing electronically not only helps ensure your return is filed correctly but also that it’s received by the tax office on time – meaning no late penalties.

Old inventory and obsolete equipment = small business tax write-offs

Writing off an asset simply means removing it from your business’ balance sheet (as it’s no longer an asset). In effect, this reduces your business’ taxable income, meaning you don’t have to pay as much tax.

If you have old, spoiled or damaged inventory or business equipment that can’t be used anymore, the current value of those items can be taken off your books to cut down your tax bill.

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4. Prepare in advance & file your taxes on time

Filing your tax return on time is key to avoiding additional fees and penalties, which vary depending on how late your return is. Late tax returns happen more often than you might think, and often simply come down to a lack of preparation. Make sure you have all your necessary documentation in order, that your books are up to date well in advance, and that you know your tax deadlines. If you carry inventory, also be sure to plan for your year-end stocktake, as this will affect your reported income on your tax return.

5. End-of-year stocktake best practices

Although automated accounting software is hugely beneficial to small businesses – especially during tax time – it’s no match for a qualified accountant or bookkeeper who knows the ins and outs of small business tax. Figuring out how to make your tax return work for you is a complicated and ever-changing affair, so don’t hesitate to ask a trusted professional for advice (and remember, accounting fees are tax deductible)!

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