When tax time comes around again, taxpayers need to collect all supporting documents necessary to help submit tax returns in an accurate and timely fashion. If you're a small business owner, nearly any purchase that helps in generating income is tax deductible. While you do need to be careful and ensure that these expenses genuinely are claimable, some can be easily overlooks and could save you money come tax time. The following are some tax deductions that shouldn't be forgotten and some tips that could save you money long term.
If your business is run from home, you can claim a portion of you electricity and water bills. Home insurance premiums can also be claimed, provided your policy covers business use. The amount claimable is often based on the overall floor space of your home office. Rates and bond interest may also be deductible. However, be weary as this can create capital gains tax implications should you choose to sell your house.
Getting from A to B
While most owners know the cost of petrol is tax deductible, many neglect to claim any tolls when they're driving to clients to undertake work. Most also forget to deduct the cost of train and bus tickets when taking public transport to a job. A simple way to avoid this is to get a business credit card, and exclusively use for travel related expenses. If you use Uber, create a business profile in the app and track work trips more easily. If you use air travel, remember you can claim the cost of membership fees for airline lounges.
If you are making donations, ensure that it is going to a reputable and registered organisation. Not only does this ensure your money is going to where it's meant to be, but you are then able to deduct a portion of what is donated against your normal tax income. Provided that you are given a donations certificate from the organisation you donated to.
Small business tax rates
Your business may be eligible for far lower tax rates than what is paid by most companies, if you meet the following:
- Your company’s gross income does not exceed R20m per year
- The shareholders/members of your company have no interest or share hold in any other company (this excludes listed companies and a few others)
- Your business must not be a personal services company (as defined for tax purposes)
- Your total receipts that result from investments or personal services doesn't exceed 20%
Finally, if you are able to record as a small business corporation (SBC) on your tax return. Not only will you qualify for a much lower tax rate, but you will be entitles to an accelerated depreciation rate on certain assets.
Use a registered (and reputable) accountant
No accountant or tax practitioner should guarantee you a refund if you aren't entitled to one. Submitting claims incorrectly, or claims you may not be entitled to, may be initially approved and result in a nice refund for yourself. However, there is every chance that this error is picked up months (or years) later. Thus, this can lead to unnecessary and often severe penalties.