The worst tax advice online is costing business owners real money. In this episode, Matt Harris and Senior Accountant Vinay Reddy react to the worst tax advice online, breaking down what actually works, what doesn’t, and what Inland Revenue really looks for.
Motor vehicles
Motor vehicles are one of the most misunderstood areas of tax, and a frequent subject of the worst tax advice online. Simply buying a car through your business doesn’t mean it’s fully deductible.
Instead, deductions depend on how much the vehicle is used for income-earning activity. If a vehicle is used 80% for business and 20% privately, generally only 80% of the costs are deductible.
Matt also explains that branding alone doesn’t make a vehicle deductible:
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Putting signage on a vehicle doesn’t automatically make it a work vehicle
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Private use must still be accounted for
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The deduction is based on actual business use, not ownership structure alone
Holidays, dinners, and the limits of deductions
Another example of the worst tax advice online is the idea that personal expenses can be turned into business deductions.
For travel, the key test is the primary purpose of the trip. If the main reason is personal, such as a family holiday, it is not deductible – even if some business activity occurs during the trip.
Business meals also have limits. In many cases, only 50% of entertainment expenses like meals and alcohol are deductible, rather than the full amount people often assume.
This reflects a core principle: deductions are based on genuine business purpose, not intent to reduce tax.
Investment properties are not tax-free
Property investing is another area where the worst tax advice online creates confusion.
While capital gains on long-term property investments may not always be taxed, rental income is still taxable if the property generates a profit.
Matt explains that:
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Rental income is taxable when it produces profit
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Loss-making properties may not generate tax payable
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Property is not automatically “tax-free” simply because it’s an investment
This distinction is critical for investors planning their long-term strategy.
Cash income must always be declared
One of the most persistent pieces of the worst tax advice online is the idea that cash income under a certain amount doesn’t need to be declared.
This is completely false.
All income is taxable, regardless of how it’s paid or whether it enters a bank account.
There is no special threshold that makes cash income exempt from tax.
Buying assets just to reduce tax often backfires
Many business owners believe spending money before 31 March will significantly reduce their tax bill.
While purchases can create deductions, the savings are often far smaller than expected. For example:
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Spending $800 may only save $224 in tax at a 28% company tax rate
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Buying a $60,000 vehicle near year-end may generate only around $420 in tax savings initially due to depreciation timing
As Matt explains, this can be a false economy – you’re still spending your own money to receive only a partial tax benefit.
Working from home and home office deductions
There is some truth to home office deductions, but they are often misunderstood.
Business owners can claim a portion of home expenses, such as:
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Mortgage interest
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Rates
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Insurance
A typical standard deduction is around 10%, unless you can justify a higher proportion based on actual business use of the home.
However, salary and wage earners generally cannot claim home office deductions, with only limited exceptions such as accounting fees or investment-related interest.
Trusts do not eliminate tax
Another common myth is that trusts remove tax entirely.
This is not true.
While trusts can offer flexibility and may allow income to be distributed efficiently, income earned through a trust – such as from investments or business activities – is still taxable.
Trusts can improve structuring, but they do not eliminate tax obligations.
Clothing and education are not always deductible
Business clothing is only deductible if it’s not suitable for private use, such as uniforms or protective gear.
If clothing can reasonably be worn privately, it generally cannot be claimed as a business expense.
Similarly, education like an MBA may not be deductible if it improves overall earning potential rather than directly relating to your current income-earning activity.
Key takeaways
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The worst tax advice online often contains partial truths taken out of context
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Motor vehicle deductions depend on business use percentage, not ownership alone
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Personal expenses like holidays are not deductible if the main purpose is private
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Rental income from investment properties is taxable when profitable
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All income, including cash, must be declared
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Spending money purely to reduce tax often results in a net loss
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Home office deductions are available to business owners but limited for employees
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Trusts do not eliminate tax – they only provide structural flexibility
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Clothing and education deductions depend on strict relevance tests
Next steps
Good tax advice builds wealth – Lighthouse Accounting can help you structure and plan ahead.
If you’d like to watch more, check out this other episode below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
