Maximise Your Tax Deductions

Last month we looked at the importance of keeping an organised record keeping system to assist with the preparation of your tax returns.

Continuing with the tax theme, this month we take a look at expenses you may be entitled to claim in your natural therapy business.

Taxable Income

Income tax is payable on the taxable income of your business.

Your taxable income is calculated as follows:

Assessable income – allowable deductions

Therefore it is important to identify all your allowable deductions, as this will reduce your taxable income and ultimately reduce the income tax that you pay.

Allowable Deductions

Most expenses that you incur directly in carrying on your business are deductible. That is, if you need to spend it for your business, you can generally claim it.

The deduction can be claimed either:

• Immediately in the current financial year; or
• Over a number of years (such as depreciation of major capital asset purchases)

How do I know if it is deductible?

Ask yourself, did you incur this expense in the course of carrying out your business?

If so, then list the payment in your record keeping system (e.g. your cash payment section of your cash book).

By keeping a record of all your payments, your accountant/tax agent can easily review your expenditure and determine whether your expenses qualify as allowable deductions. Your accountant/tax agent will then expense it accordingly in the current year or over the relevant number of years.

Allowable deductions for Natural Therapies:

Here is a list of expenses that are commonly incurred in carrying on a business in the natural therapies industry:

• Rent or lease of business premises
• Membership fees to Associations
• Business Insurances
• Accounting and book keeping fees
• Business registration fees and other government fee
• Bank fees
• Advertising
• Marketing materials (e.g. business cards, pamphlets)
• Computer and IT Costs
• Printing and stationery
• Telephone/internet
• Supplies (e.g. candles, sprays, towels, cds)
• Laundering costs incurred (e.g. masseur’s towels)
• Training /CPE hours
• Payments to employees
• Purchase of trading stock
• Parking
• Interest on any business loans

Other deductions:

Items to talk to your accountant/tax agent as to whether you qualify for a deduction include:

• Travel expenses
• Motor vehicle expenses
• Home office expenses

Conclusion

Keeping a record of all your business expenses will help your accountant/tax agent determine what your allowable deductions are.

Remember that if you are in doubt as to whether the expenses is an allowable deduction, ask yourself this question: Did you incur the expense in the running of your business? If you are still uncertain, create a suspense account in your accounting software, or a suspense column in your cash book as a reminder to query with your accountant.

Ultimately, the more allowable deductions you have results in a reduction of the income tax you have to pay.

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Tips to be organised:

1. Keep a record/ (list) of all payments you make on behalf of your business

2. Make sure you obtain a copy of the tax invoice at the time of purchase

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Disclaimer: This article is an information guide only. It neither purports or intends to be advice. Always seek advice from your accountant/tax advisor to ensure that the items you seek to claim are an eligible tax deduction for your individual business.