Knowing what and how much to claim in expenses on your Income Tax Return or financial records is probably more important than you imagine.  Read on to find out more.

Legitimate expenses lower your taxable income

If you own a small or medium business, there are a number of expenses you can claim through the business to lower your taxable income.  And it’s tempting to claim as much as you can, perhaps even get creative to squeeze out those extra cents.

But be warned – what you do claim helps your cashflow for now, but it will also reduce your net income, which could affect the amount you could borrow from a bank or mortgage broker in the future.

We’ve seen it plenty of times before, someone starts out in business and wants to claim as much as they legally can. Then a few years down the track, their business is doing well and they decide they’d like to buy a house. When they go to the bank or their mortgage broker, they are told they haven’t earned enough to borrow the amount they want to.

When you submit your Income Tax Return remember that the more expenses you claim, the less borrowing power you have.

Beware of IRD audits

Additionally, make sure that all the expenses you do claim are legitimate – the IRD has the power to audit tax returns filed in the past and will charge hefty penalties where the expenses claimed are not legally allowed.

More information on business expenses (IRD)

More information

Some of our other blogs that might be useful:

The do’s and don’ts of claiming home office expenses

How to have a happy relationship with the IRD

We can help

Our team can assist you with your legitimate claimable expenses and ensure you have a reasonable balance between lowering your taxable income now without restricting your future borrowing opportunities.  Contact us now to arrange an appointment.