Paying taxes is part of running a business, but paying more than you should is not. Many business owners in Malaysia unknowingly fall into simple traps that result in higher tax bills every year.
These mistakes are easy to make but even easier to avoid once you understand where most people go wrong. Here are three common tax traps that could be costing you more than necessary.
1. Mixing Personal and Business Expenses
This is one of the most common tax mistakes made by small business owners. When you use the same bank account or credit card for both personal and business transactions, your records become unclear.
For example, if you buy office supplies and groceries with the same card, it becomes difficult to prove which expenses are business-related. During an audit, these expenses can be disallowed, which means you end up paying more tax.
Tip: Always use a separate bank account for business transactions. This makes your records cleaner and your claims easier to justify.
2. Missing Out on Allowable Deductions
There are many deductible expenses that business owners often overlook. These include rent, utilities, marketing, accounting fees, and other costs directly related to business operations.
If you do not keep proper records, you might forget to claim some of these legitimate deductions. Even small expenses can add up to significant tax savings at the end of the year.
Tip: Keep all receipts and invoices, and record your expenses monthly. Consider using accounting software to help you track everything.
3. Not Planning Ahead for Tax Season
Many business owners wait until the last minute to prepare their tax filings. This often leads to rushed work, calculation errors, or missed opportunities for tax savings.
A lack of planning can also cause you to miss out on available tax incentives or reliefs offered to SMEs. Reviewing your accounts regularly throughout the year helps you make adjustments early and stay ready for tax season.
Tip: Set aside time every quarter to review your finances or speak to a tax advisor who can help you plan better.
► Common Pitfalls to Avoid
- Mixing personal and business expenses, which makes it hard to justify claims during tax filing.
- Missing allowable deductions because of poor record keeping or lost receipts.
- Not planning ahead for tax season and missing chances to reduce your tax burden.
✅ By understanding these traps, you can avoid unnecessary tax issues and keep your finances organised.
Tax mistakes are common but they do not have to be costly. By separating business and personal expenses, tracking your deductions properly and preparing early, you can avoid these traps and save more of your income.
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