For companies, expenses incurred before the end of the financial year are 28% cheaper than they are if they are incurred from April onwards. This is because the 28% would have been lost to tax. For individuals, partnerships and trusts, the saving can be as high as 33% (or 39% next financial year).
To illustrate how this works, let’s say you spend $1000 before the end of the financial year. You can deduct this as an expense on your company tax return which reduces your tax payable by $280 (28% of $1000). This means the expense only actually costs you $720 – what a bargain.
Long story short: for the next week the IRD is having a 28% off sale on business expenses if you own a company and potentially more if you have an alternative business structure. The tax man is also kind enough to let you buy some things for next financial year and reduce your tax bill in the process. These expenses are known as prepayments. For the avoidance of doubt, not all prepayments are deductible but there’s plenty that are.
Here are some things you can deduct:
🔧 𝐀𝐬𝐬𝐞𝐭𝐬 𝐮𝐧𝐝𝐞𝐫 $𝟏𝟎𝟎𝟎
Since March 17, any assets you purchase under $1000 are a deductible expense and for the next week, they’re 28% cheaper. Any asset you need for the next year which costs less than $1000 excluding GST is worth getting now.
📈 𝐀𝐝𝐯𝐞𝐫𝐭𝐢𝐬𝐢𝐧𝐠
A lot of businesses don’t market themselves enough. You can deduct up to $14000 of marketing costs that are incurred within 6 months of the end of the financial year provided you make the purchase within the next week.
👨💼 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐅𝐞𝐞𝐬
The IRD allows you to deduct prepayments for “mandatory accounting costs”. In short, this means what you pay for compliance or what you “have to do” according to the law. Paying us our annual fee in advance may be deductible for you this financial year.
🔨 𝐑𝐞𝐩𝐚𝐢𝐫𝐬 𝐚𝐧𝐝 𝐌𝐚𝐢𝐧𝐭𝐞𝐧𝐚𝐧𝐜𝐞
If any of your assets need fixing, now is the time to do it. Vehicles need repairs or a service? Machinery or tools broken? Get them sorted and minimise your tax bill.
🚘 𝐌𝐨𝐭𝐨𝐫 𝐕𝐞𝐡𝐢𝐜𝐥𝐞 𝐄𝐱𝐩𝐞𝐧𝐬𝐞𝐬
An unlimited amount of road-user charges, licensing and registration fees can be prepaid and are deductible.
🏢 𝐑𝐞𝐧𝐭
You can prepay up to 6 months of rent of land and buildings and deduct this as an expense this financial year provided it does not exceed $26000 total.
🛫 𝐓𝐫𝐚𝐯𝐞𝐥
Going somewhere? Any travel plans you have within the next 6 months can be bought now at a discount. All travel costs and accomodation (hotels and motels) can be deducted up to $14000.
✏️ 𝐒𝐭𝐚𝐭𝐢𝐨𝐧𝐞𝐫𝐲
All prepaid stationery is deductible when purchased.
It’s important to note this doesn’t extend to purchases of finished inventory or most other asset purchases so it’s of no benefit to you to go out and buy a whole lot of stock. It also doesn’t include repayments on liabilities so there’s no point in paying off your loan balances in a hurry.
There are also cashflow and return on investment considerations to factor in. You don’t want to go on a spending spree “just because” and end up worse off. It’s important to ask yourself (or us): Could that cash be better used elsewhere? For all business owners, you have about a week to take advantage of this tax opportunity before it’s gone for another year.
As always, check with us if you’re not sure and for advice specific to your situation.
