Business and personal finances should not be mixed and keeping them separate will save a lot of hassle when it comes to managing your money and saving you money, says New Zealand’s premier accounting professionals Tauranga-based Tutbury & Associates.
By having a clear line between the two it makes it’s easier to get a clear snapshot of your finances. This helps with avoiding using personal money from funds that would go towards running your business and vice versa.
“This is also handy when you are meeting with your accountant and working out your total financial position,” says Kelly Tutbury, Accountant and Managing Director at Tutbury & Associates Limited.
Having your business and personal finances will make tax time a whole lot easier when it comes to sorting out your returns. Otherwise you will have to go through all your bank statements from the year trying to identify each business transaction. Not only is this time consuming, it means you may also miss valid business expenses hidden and lose out on possible tax deductions.
Think about using an online accounting tool, like Xero. A tool like this can integrate with your banking, and automatically send information back to your accounting system.
The majority of the time the line between personal and business expenses is obvious. Any expense that is directly related to your business earning an income is a business expense.
If you purchase something to be used for your business it’s a deductible business expense. If you purchase something with the intent for private use that would be a personal expense.
There are items, such as a vehicle that could be used for both business and personal use, you can only claim a deduction for the amount that you use for business. For example, if you use the vehicle 80% of the time for business and for personal use 20% of the time you can only deduct 80% of the vehicle. (To work out the % you need to do a log book)
“If you are working from home and have a home office for running your business you can claim a portion of your related expenses,” advises Kelly. This can be one of the biggest tax saving expenses, as it covers off a lot of things, power, rates, interest on mortgage for example.
Contact Tutbury & Associates Limited:
Phone: 07 576 2194
Address: 23 Myres Street Tauranga