{"id":5536,"date":"2015-11-26T16:37:51","date_gmt":"2015-11-26T21:37:51","guid":{"rendered":"https:\/\/www.sage.test\/en-ca\/blog\/?p=99"},"modified":"2026-01-16T06:32:49","modified_gmt":"2026-01-16T11:32:49","slug":"eight-ways-small-businesses-pay-less-tax","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-ca\/blog\/eight-ways-small-businesses-pay-less-tax\/","title":{"rendered":"Eight ways for small businesses to pay less tax"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tEight ways for small businesses to pay less tax\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2015-11-26T16:37:51-05:00\">November 26, 2015<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Eight ways for small businesses to pay less tax\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-ca\/blog\/eight-ways-small-businesses-pay-less-tax\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-ca\/blog\/author\/owen\/\">\n\t\t\t\t<img decoding=\"async\" alt=\"\" src=\"https:\/\/www.sage.com\/fr-ca\/blog\/wp-content\/uploads\/sites\/16\/2019\/04\/Owen_sage-advice-002.jpg\" class=\"entry-author__image\" height=\"40\" width=\"40\" fetchpriority=\"high\" \/>\t\t\t\t<span class=\"entry-author__name\">Owen Sweeney<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<p><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">It\u2019s not uncommon for small business owners to worry about business taxes, and no one wants to pay more than necessary. Of course your tax should rise if your profits are increasing year on year (which is a good thing), but you can minimize the tax you pay by making sure you claim everything you can as an expense, and a few other tricks.<\/span><\/p>\n\n\n\n<p>Use the tips below to reduce your business tax in your first year of business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1-get-organized\">1. Get organized<\/h2>\n\n\n\n<p>The first order of business is to get organized. You can\u2019t claim as an expense what you can\u2019t remember or document. The Canada Revenue Agency (CRA) may disallow deductions if you can\u2019t support them.<\/p>\n\n\n\n<p>Keep detailed records of everything<\/p>\n\n\n\n<p><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\"><mark class=\"highlight-and-share\">If you\u2019re super organized and track every business expense, you\u2019ll never miss claiming an expense \u2013 and as a result, you\u2019ll pay less tax.<\/mark> Keep every receipt and record of note.<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Keep a record for expenses split between business and personal \u2013 for example, if you\u2019re claiming for a vehicle you must keep a journal to show the percentage of the vehicle\u2019s business use.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">File everything in logical order; every receipt, invoice or proof of purchase (even for cups of coffee purchased for a business meeting).<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Leverage technology \u2013 accounting software will track every expense and make sure you never forget to claim an expense.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2-set-up-a-work-area-at-home\">2. Set up a work area at home<\/h2>\n\n\n\n<p>Set up a room in your house as your office, using it specifically for your business (even if your main business is located elsewhere). You can claim a portion of expenses related to the business use within your home, and let\u2019s be honest, chances are you do some work from home in the evenings and weekends. Examples of potential partial deductions include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Maintenance costs (like heating, electricity, home insurance and cleaning supplies).<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Mortgage interest.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Property taxes.<\/span><\/li>\n<\/ul>\n\n\n\n<p>To calculate the portion that you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home. If you use the space for personal use or run the business part time, you\u2019ll need to reduce your claim accordingly.<\/p>\n\n\n\n<p>According to CRA, you\u2019ll need to meet one of the following conditions in order to deduct expenses for the business use of a work space in your home:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">It is your principal place of business; or<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">You use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-split-your-income\">3. Split your income<\/h2>\n\n\n\n<p>Consider allocating some of your business\u2019 income to your life partner. You might actually be discussing your business with your significant other all the time anyway, so pay your life partner a small salary if you can take advantage of a lower tax rate. In Canada, the more you make, the more you pay so dividing your incomes might be a sound strategy. Check with your accountant or advisor to double check it\u2019s allowed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-4-maximize-your-registered-retirement-savings-plan-rrsp-contributions\">4. Maximize your Registered Retirement Savings Plan (RRSP) contributions<\/h2>\n\n\n\n<p>According to CRA, deductible RRSP contributions can be used to reduce your tax. Not only will you receive a tax deduction for your contributions, the money in your RRSP account will grow tax-free as long as the funds remain in the plan. You will, however, have to pay tax when you receive payments from the plan.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-5-you-may-be-able-deduct-premiums-paid-or-payable-to-a-private-health-services-plan-phsp\">5. You may be able deduct premiums paid or payable to a private health services plan (PHSP)<\/h2>\n\n\n\n<p>If your business is unincorporated, that is if you are a self-employed individual or in a partnership, you may be able to deduct your PHSP premiums. You must be actively engaged in the business on a regular and continuous basis and meet specific income requirements. Check with the CRA or your tax advisor to see if you are eligible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-6-take-advantage-of-the-end-of-the-year\">6. Take advantage of the end of the year<\/h2>\n\n\n\n<p>The end of the year is a good time to adjust parts of your business to reduce net profit legitimately. If you can claim or adjust your business income or expenses to lower your net profit, then your tax owed will reduce accordingly. Below are a few examples:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Buy any fixed assets just before the end of your financial year (not just after) as you will be able to claim a portion of depreciation straight away (which lowers your net profit).<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Revalue your assets. If you have an asset (such as a computer or old equipment) that has a book value on your accounts, but is actually worth much less, then slash its value (as long as it\u2019s true). Your net profit will then be reduced as you increase your depreciation claimed on this asset.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Delete any assets that are no longer in use or have zero value. This is similar to reducing the value, but this time the asset will be scrapped. The remaining book value will be reduced to zero, and whatever was left becomes \u2018loss on sale of asset\u2019 which will reduce your net profit.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Consider having an end-of-year sale to clear out old stock and reduce your cost of goods sold. Even if you make a loss on some stock, it\u2019s better to have it cleared out anyway. Not only will you convert old stock to cash, but you will be removing the value of the old stock off your books.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">If there is a debt owed to you, and you think you will never see the money ever again, then you could write it off. In the past year when you counted this as revenue, you would have paid tax on it (as the CRA assumed you would get it one day). If that is no longer the case, write it off (which will lower this year\u2019s profit).<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Did you receive any income in advance? For example, if you were paid for work that you don\u2019t need to do until the next financial year, you don\u2019t have to count it in the current year\u2019s sales (it gets counted in the following year). It does catch up, but just not in the current tax year.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-7-file-your-returns-on-time\">7. File your returns on time<\/h2>\n\n\n\n<p>This seems obvious, but filing on time will mean you\u2019ll avoid any penalties or interest. The filing and payment deadlines vary depending on your business type, so make sure to check the <a href=\"http:\/\/www.cra-arc.gc.ca\/tx\/bsnss\/sm\/chcklst-eng.html\" target=\"_blank\" rel=\"noopener noreferrer\">CRA website<\/a> to find out when you must file your returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-8-finally-try-and-avoid-an-audit\">8. Finally, try and avoid an audit!<\/h2>\n\n\n\n<p>The CRA have the right to audit your business to double check that the profit that you are declaring (and therefore paying tax on) is correct. If you underestimate profit, they can penalize you. If you claim business expenses but have failed to keep receipts to support your claim, they\u2019ll disallow those deductions. If you have poor records, missing invoices and receipts, then they could ask to go through everything with a fine tooth comb &#8212; stress and time spent you don\u2019t need.<\/p>\n\n\n\n<p>On the other hand, if you have great records using <a href=\"https:\/\/www.sage.com\/en-ca\/products\/sage-50cloud\/\">accounting software<\/a> that tracks everything and links to your bank statements, then the CRA will be better assured that everything is accurate. Accounting software won\u2019t prevent an audit, but it could help avoid raising audit-triggering red flags as well as make the audit less painful.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-take-action\">Take action<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">To be clear about what taxes you need to pay, see the <a href=\"http:\/\/www.cra-arc.gc.ca\/tx\/bsnss\/sm\/chcklst-eng.html\" target=\"_blank\" rel=\"noopener noreferrer\">Canada Revenue Agency checklist for small businesses<\/a>.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">Talk to your accountant or business adviser as soon as you can about all of these ideas; every business is different and for tax advice, you need to talk to a qualified professional who understands your business.<\/span><\/li>\n\n\n\n<li><span style=\"font-family: HelveticaNeueLTStdRegular, Helvetica, sans-serif;\">If you are using a manual system for tracking sales and expenses, it could be time to upgrade to accounting software to remove the guess work. Click below to learn more about Sage 50cloud accounting to see how it can help track expenses and file your taxes properly.<\/span><\/li>\n<\/ul>\n\n\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Practice of Now 2020<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>We surveyed 3,000 accountants worldwide to reveal how the accounting landscape is changing. Discover how your fellow accountants are preparing for the next decade and learn what you can do now to keep your practice successful.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-feedbf63-dbb1-456b-b933-af06cb4c253e\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Get The Practice of Now 2020<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t<div class=\"single-cta__downloads\">\n\t\t\t\t\t\n\t\t\t\t\t2,545 readers have downloaded this guide\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1215\" height=\"810\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2020\/07\/FloatDigital_FY18_Accounting_307317-1215x810.jpg\" class=\"single-cta__image\" alt=\"Woman in mustard coloured top standing arms folded in front of desk\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2020\/07\/FloatDigital_FY18_Accounting_307317-1215x810.jpg 1215w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s not uncommon for small business owners to worry about business taxes, and no one wants to pay more than necessary. Of course your tax should rise if your profits are increasing year on year (which is a good thing), but you can minimize the tax you pay by making sure you claim everything you [&hellip;]<\/p>\n","protected":false},"author":737,"featured_media":186,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"sage_hide_published_date":false,"sage_hide_read_time":false,"sage_hide_share_buttons":false,"footnotes":""},"categories":[7],"tags":[168,169,190,195,207,211],"business_type":[3],"lilypad":[],"context":[],"industry":[127],"persona":[83],"imagine_tag":[49,67],"coauthors":[310],"class_list":["post-5536","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-business-management","tag-business-strategy","tag-financial-insights","tag-making-financial-decisions","tag-saving-business-money","tag-tax","business_type-small-business","industry-financial-services"],"sage_meta":{"region":"en-ca","author_name":"Owen Sweeney","featured_image":"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2019\/01\/GettyImages-665473133_super.jpg","imagine_tags":{"49":"growing business","67":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice Canada English","distributor_original_site_url":"https:\/\/www.sage.com\/en-ca\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts\/5536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/users\/737"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/comments?post=5536"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts\/5536\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/media\/186"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/media?parent=5536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/categories?post=5536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/tags?post=5536"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/business_type?post=5536"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/lilypad?post=5536"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/context?post=5536"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/industry?post=5536"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/persona?post=5536"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/imagine_tag?post=5536"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/coauthors?post=5536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}