Continuing on from our article “Business Expenses: What Can You Claim?” in our April/May newsletter, we provide further advice on different claimable business expenses that can be claimed against your income.
Claimable Expenses: Home Office
If the home is used for work purposes then a proportion of expenses relating to the property are deductible. To claim home office expenses, a specific part of the house must be set aside for business. It can be a separate room or part of a room as long as it is used for the business and nothing else. The proportion of expenses claimable is based on the proportion of area used for business versus the total size of the area. Typical home office expenses that can be claimed include:
- Repairs and maintenance
Please note that repairs and maintenance can only be claimed in relation to the home office itself and their extension to communal areas, for example leaky roof.
Claimable Expenses: Clothing
The IRD will permit a deduction for “distinctive work clothing”, defined as items which form part of a uniform that is identifiable with the employer because of logos or the pattern, colour scheme or style. A deduction cannot be claimed for jeans, sneakers, suits and so on because they do not meet the definition of “distinctive work clothing”. Clothing branded with the business logo, steel-capped boots and high-visibility vests are all examples of distinctive work clothing and therefore deductible for tax purposes.
Claimable Expenses: Website
The cost of creating or upgrading a business website is classed as capital expenditure and should be capitalised and depreciated. The ongoing costs of maintaining an existing business website are deductible for tax purposes.
Claimable Expenses: Low Value Assets
Business assets costing less than $500 (including GST if not GST registered and excluding GST if registered) can be fully expensed in the year of purchase for tax purposes and are not required to be capitalised and depreciated.
Claimable Expenses: Combined Business and Private Travel
If travel is part business and part holiday – whether in New Zealand or overseas – the IRD look at the dominant purpose of the trip to determine deductibility of expenditure. If the purpose of the trip is principally for business then the travel expenditure (airfares, accommodation etc) will be deductible with the exception of any expenses relating directly to the personal part of the holiday. Conversely if the purpose of the trip is principally for personal pleasure the travel expenditure will not be deductible with the exception of costs directly incurred in carrying out business activities, e.g. taxi to a conference, cost of a meal with a supplier.
The following types of expenditure are not deductible for tax purposes:
- Set up costs incurred before your business has started operating
- Costs incurred breaking the law, for example parking tickets or speeding fines
- Private expenditure – drawings taken from the business
Please contact us if you have questions regarding claimable businesses expenses to help reduce your business’ tax burden.