While many expenses incurred in the course of doing business can be claimed to reduce your income tax, certain expenses are not deductible for tax purposes. These include:
- Late filing and late payment penalties imposed by the IRD.
- Costs related to breaking the law, such as speeding tickets or parking fines.
- Insurance premiums relating to personal sickness, life insurance, mortgage protection insurance or accident insurance policies.
- The principal portion of loan repayments.
- The purchase of new plant, machinery or equipment, although these costs may be able to be depreciated. The cost of any repairs or maintenance to equipment or machinery will be deductible.
- Clothing, footwear and eyewear is usually not deductible unless it is specific to the occupation, for example safety boots, hi-vis vests, safety goggles and uniforms.
- Legal costs relating to capital acquisitions, such as purchasing a new business. There is one exception to this, and that is when legal costs are incurred for business purposes and are below $10,000 in total for the year. In this case, the legal fees would be fully deductible regardless of whether they were incurred for capital or income account purposes.
- Initial costs incurred in setting up your business, for example website development or registration with the NZ Companies Office.
Please contact us if you have any questions regarding non-deductible expenses.