Running a small business includes a lot of expenses, some obvious, and some not-so-obvious. While managing day-to-day operations at work, it’s easy to overlook certain expenses that could potentially save you a significant amount on taxes. We call these Tax Deductible Expenses.
This is where the expertise of a reliable accountant becomes invaluable. At Verbeek Consulting, we understand the importance of thorough financial reporting and finding expenses that can help with tax deductions for our clients. We help manage your books for you so that you do not have to worry about managing expenses. Allowing you to focus on your core competincies as a business owner.
Here are six Tax Deductible Expenses you should always remember to share with your accountant, ensuring you’re not leaving any money on the table when it comes to tax time.
Vehicle Expenses
If your business involves the use of a vehicle, whether it’s a company car or your personal vehicle used for business purposes, there are several deductible expenses to consider.
This includes fuel, maintenance, insurance, and depreciation. However, it’s crucial to differentiate between business and personal use to avoid any potential tax complications.
It’s important to keep your personal and business use separate. This may be tricky for a car you use for both but it’s important to separate these so that you do not receive any penalties from SARS.
By keeping detailed records and utilising tools like travel logbooks, you can accurately allocate expenses and maximise deductions.
With this in mind, it’s a good idea to open a business bank account to keep all your business income and expenses separate from your personal ones. And remember that you’ll need to keep these records for at least five years after the relevant tax year.
Read more from SARS on when you can claim for travel.
Travel and Accommodation
Business travel often incurs significant expenses such as flights, hotels, car rentals, and meals. These costs are generally Tax Deductible Expenses, but proper documentation is key.
Your accountant can help ensure you’re capturing all eligible Tax Deductible Expenses and maintaining the necessary records to substantiate them.
Verbeek Consulting will ensure that you have all your receipts on hand and that you match a transaction/payment with a receipt on whatever accounting platform you use.
Additionally, understanding the tax implications of subsistence allowances and fringe benefits tax can help you optimise your travel expenditure.
Subscriptions and Licenses
It’s easy to overlook the recurring costs of subscriptions and licenses essential for running your business.
Whether it’s software subscriptions, business tools, professional memberships, or industry-specific licenses, these expenses can add up.
By informing your accountant at Verbeek Consulting about these Tax Deductible Expenses, we can ensure they’re properly categorised and deducted, reducing your taxable income.
Capital Expenses
Major purchases intended for long-term use in your business, such as equipment, furniture and machinery or tech requirement, laptops and ophones, qualify as capital expenses. These expenses are usually more costly and are once-off exopenses.
These expenses can often be deducted over time through depreciation or claimed as an immediate expense under certain circumstances.
Your accountant can advise you on the most tax-efficient way to handle capital expenses, maximising your deductions while staying compliant with tax regulations.
Education and Training
Investing in education and training for yourself or your staff is not only beneficial for business growth but also tax-deductible.
Whether it’s attending workshops, courses, or industry conferences, these expenses can be claimed as business deductions. These may include any training or further education into maintaining or boosting the skills needed to run your business efficiently.
By keeping your accountant informed about these investments in skills development, you can offset your taxable income while enhancing your professional capabilities.
Check out the tax guide for small businesses with SARS.
Start-up Costs
If you’ve incurred expenses before officially launching your business and before your first year of trading. These include market research, advertising, or equipment purchases and are considered start-up costs.
While some start-up expenses can be deducted immediately, others may need to be Tax Deductible Expenses over time.
By working closely with your accountant, you can ensure these costs are properly accounted for and deducted in the appropriate manner. Minimising your tax liability.
What Records Do I Need to Keep for Tax Deductible Expenses?
At Verbeek Consulting, we understand that knowing what expenses you can claim means nothing if you aren’t strict about record-keeping.
Maintaining accurate records is crucial to substantiating your claims, especially when you need to show SARS that your deductions are valid and business-related.
Here are some essential records that you should hold onto:
Entertainment Expenses
When it comes to entertainment, meticulous documentation is key. You must record details about the cost of entertainment so that SARS can verify its business-related nature.
If you entertain a client, make sure to note the date, attendees, purpose, location, and cost of the entertainment.
Depreciation Schedule
For assets exceeding R7,000 in value, if you’re claiming depreciation, you need to be able to demonstrate how you calculated the amounts deducted from your taxable income.
You will also need to provide an invoice proving the purchase of the asset in question.
Travel Claims
Any expenses related to travel, such as petrol, toll fees, vehicle repairs, and insurance, must be supported by a detailed logbook.
The logbook should include the odometer reading at the start and end of the financial year, as well as specifics about each trip taken (date, reason for travel, distance covered). This ensures proper differentiation between business and personal mileage.
Personal vs. Business Expenses
It’s common to have overlapping personal and business expenses. Keeping a clear record of all expenses is crucial.
By accurately distinguishing between business-related and personal expenses, you can claim the correct amount during tax season.
Remember, you are required to keep these records for at least five years after the relevant tax year.
By maintaining meticulous records, you not only ensure compliance with tax regulations but also streamline the tax filing process and maximise your allowable deductions.
At Verbeek Consulting, we’re here to assist you every step of the way, providing guidance on record-keeping best practices and ensuring your financial records are in order for tax compliance and optimisation.
Additional tax deductible expenses to look out for
Repairs and Maintenance with Verbeek Consulting
One of the crucial aspects of keeping a business operational is ensuring that its physical assets are in good condition.
Repairs and maintenance costs are often inevitable and unavoidable, whether it’s fixing broken machinery, refurbishing premises, or maintaining vehicles.
With Verbeek Consulting as your trusted advisor for small businesses, navigating the tax implications of repairs and maintenance becomes more manageable.
Here’s how SARS allows businesses to deduct these expenses, provided they meet certain criteria:
Necessity
The repair or maintenance should be necessary to keep the asset in its working condition or to restore it to its original state.
Revenue Expenditure
The expense should not be a capital expenditure, meaning it should not result in a significant improvement or enhancement of the asset’s value. Instead, it should merely maintain the asset’s existing condition.
If it is an improvement, it doesn’t mean it should be forgotten or not tax deductible. This just means that it is capitalised and included in the asset’s base cost i.e. cost, and when the asset is sold, the Capital Gains Tax will be less.
Ordinary Course of Business
The expense should be incurred in the ordinary course of your business operations.
By collaborating with Verbeek Consulting, you can ensure that your repairs and maintenance expenses are accurately accounted for and deducted, maximising your allowable deductions while staying compliant with tax regulations.
Employee Benefits
Taking care of your employees’ welfare is not only a moral obligation but also an expense that can have tax benefits.
SARS recognizes the importance of employee well-being and allows for the deduction of certain staff welfare expenses.
These might include:
Nature of Gifts
The gifts should be given in the ordinary course of business and should be directly related to promoting your business interests. i.e. will bring in more income or make sure that the client remains a client. These can come in the form of vouchers or more.
Employee Benefits
Expenses related to employee benefits like medical aid contributions, retirement fund contributions, and group life insurance premiums can be deducted.
On-Site Facilities
Costs associated with providing on-site facilities such as staff canteens or recreational areas can also be deductible.
Conditions
Ensure that the expenses are provided to all employees on a consistent basis. Exclusivity or preference to certain employees might lead to partial or non-deductibility.
Give us a call or book a meeting with us, and we will ensure that you optimise your tax position while maintaining financial transparency and compliance.
With our expertise and guidance, you can navigate the intricacies of deductible expenses with confidence, helping your business thrive and grow.
Don’t forget to consider using Quickbooks, Sage or Palladuim as a club based accounting platform to keep a record of your expenses, especially if you are VAT registered.
Is There an Easier Way to Keep Track of Everything with Verbeek Consulting as Your Bookkeeper for Small Businesses?
If SARS does audit you and finds that you claimed non-deductible expenses. You’ll have to pay additional taxes and a penalty. To avoid this, you’ll need to stay on top of your finances.
If capturing data on multiple Excel spreadsheets is proving too time-consuming, consider leveraging Verbeek Consulting’s expertise as your bookkeeper for small businesses and implementing cloud-based accounting software. We specialise in Quickbooks, Sage 50 and Palladuim Accounting.
This approach not only saves time but is also more accurate than manually populating spreadsheets. With the right software. You can easily import expenses and receipts and capture physical receipts digitally, ensuring that all the supporting documentation needed to verify your costs is stored in one convenient location.
If you’re still struggling to make sense of your expenses. Don’t hesitate to seek advice from a professional tax consultant or accountant.
With Verbeek Consulting by your side. You can access expert guidance and support to navigate the complexities of tax compliance and optimise your financial processes.
To sum up
At Verbeek Consulting, we specialise in helping small business owners navigate the complexities of financial reporting and tax optimisation. Our dedicated team is well-equipped to identify all eligible expenses that can reduce your tax burden while ensuring compliance with regulatory requirements.
By entrusting us with your bookkeeping and accounting needs, you can focus on what you do best—growing your business and serving your customers.
Don’t hesitate to reach out for assistance with any financial matters or tax-related questions. We’re here to help you succeed every step of the way.