Understanding Business Expense Claims in NZ
Running a business involves a multitude of expenses, but there are ways to cut costs by claiming certain business-related expenses on your taxes. If you are a business owner, you have the opportunity to claim various expenses incurred in the process of generating income, which helps reduce taxable income and allows you to retain more of your hard-earned revenue.
Business Like can help you understand common business expense claims in compliance with IRD regulations to help you minimise expenses and improve your financial health.
A business expense claim is a deduction that business owners in New Zealand can apply to reduce their taxable income by the costs incurred in running their business. These expenses must be directly related to generating business income and are intended to reflect the operational costs necessary for day-to-day functions. When correctly claimed, business expense deductions help lower the total tax payable, allowing business owners to retain more of their revenue.
To make a claim, the expenses must be documented, reasonable, and directly connected to the business. The Inland Revenue Department (IRD) has guidelines on what constitutes a business expense, and keeping accurate records is essential to ensure compliance and maximise your deductions.
You can consult with expert chartered accountants at Business Like to ensure that you maximise business expense claims NZ and remain compliant with IRD regulations.
Common Business Expense You Can Claim in New Zealand
Vehicle Expenses
For vehicles used partly or fully for business purposes, you can claim a percentage of related expenses, including fuel, maintenance, insurance, registration, and depreciation. If your vehicle is used for both personal and business trips, the percentage of business use—determined by keeping a 90-day logbook—dictates the portion you can claim.
For example, if you use the vehicle 60% for business, you can claim 60% of all associated costs. Alternatively, the IRD mileage rate (e.g., 79 cents per km) can be used for occasional business use of a personal vehicle.
For more information, you can read our guide to deducting vehicle expenses for business.
Travel Expenses
Business-related travel expenses, such as flights, accommodation, and meals, are fully deductible. You can claim travel costs for trips between business locations, overseas business travel, and travel for asset or equipment purchases. However, commuting between home and a regular place of business isn’t deductible, unless your home is also your primary business base.
Most travel expenses are deductible in the income year incurred, but prepaid travel expenses over $14,000 or for trips starting more than six months after your balance date may need to be spread across years.
Home Office Expenses
If you operate your business from home, you can claim a portion of home-related costs, such as mortgage interest or rent, power, internet, and phone expenses. The claimable portion is calculated based on the total area of your house that is used for business purposes. For instance, if 20% of your home is dedicated to business activities, you can claim 20% of these household expenses.
Office and Administrative Costs
Administrative expenses essential to running an office, including stationery, office supplies, internet, phone bills, and office rental, are deductible. As these are direct business costs, 100% of these expenses can typically be claimed, provided they are incurred exclusively for business use.
Employee Salaries and Wages
Salaries, wages, and other employment-related expenses, including ACC levies, KiwiSaver contributions, and holiday pay, are fully deductible. These costs are recorded as expenses in the same year they are paid, allowing businesses to claim 100% of their employee costs as deductions.
Professional Fees
Fees for professional services, such as those from accountants, lawyers, and business consultants, can be claimed as they contribute to the efficient management and compliance of your business. These costs are usually 100% deductible, as they directly support business operations and decision-making.
Depreciation on Business Assets
Assets like computers, vehicles, machinery, and other equipment lose value over time, and businesses can claim depreciation as an expense. The IRD provides specific rates for various assets—for instance, computers typically have a depreciation rate of 50% Diminishing Value (DV). Depreciation allows you to claim a portion of the asset's cost each year, reflecting its decline in value and spreading the expense over its useful life.
If you need guidance in understanding this claim, you can talk to our Manukau and Auckland accountants. Our team is always there to assist you.
Insurance Premiums
Premiums for business-related insurance, such as public liability, professional indemnity, or asset insurance, are deductible. These premiums help protect your business against risks, and the full amount spent on insurance can typically be claimed as a business expense, reducing overall taxable income.
Interest on Business Loans
Interest payments on business loans or credit used for business purposes can be claimed, helping to reduce taxable income. If you took a loan of $10,000 with a 5% annual interest rate, you could claim the $500 interest paid each year as a deductible expense, provided the funds were used solely for business activities.
Utilities and Rental Expenses
Utilities like electricity, water, and other necessary operational costs, as well as rent for business premises, are fully deductible if they are directly related to business activities. For instance, if you pay $1,000 per month in rent for an office space, this entire amount can be claimed as a business expense, as it supports the day-to-day operations.
Repairs and Maintenance
Repairs and maintenance costs for business assets or premises are deductible, provided these are for upkeep rather than improvements. For instance, if you spend $500 on repairs for business machinery, this amount is deductible, as it keeps the asset in working condition without increasing its value or capacity.
How to Claim Business Expenses in New Zealand
Now that you’re familiar with common business expenses you can claim, the next step is understanding how to claim business expenses nz with the Inland Revenue Department (IRD). Follow these steps to ensure a smooth and compliant process.
- Business expenses are claimed on your income tax return. Small businesses and sole traders include these deductions on their IR3 or IR4 forms. If you are using accounting software like Xero, categorise expenses appropriately to streamline this process.
- If your business is GST-registered, you can also claim the GST portion of your business expenses. Be sure to keep GST invoices, and include these claims in your GST returns.
- IRD mandates that businesses keep accurate records of all claimed expenses. Keep receipts, invoices, bank statements, and any other evidence of the transaction. For mixed-use expenses, like a vehicle or home office, maintain records that distinguish between business and personal use.
- For complex expenses, like asset depreciation or tax planning, consider consulting an accountant. A professional can help ensure you’re maximising your deductions while staying compliant with IRD guidelines.
Contact Your Local Accountants to Easily Claim Business Expenses
By adhering to the IRD’s guidelines on business expenses, NZ business owners can file compliant claims that accurately reflect their costs. Keep in mind that the allowable deduction amount and timing may vary based on the expense type. If you need further assistance in this matter, you can talk to our team.
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Brendan Price – Partner
I started working at Business Like in late 2013 and appointed partner in 2017. I work with a wide range of clients in trades, manufacturing, technology, financial services as well as high net worth individuals. I’m passionate about helping business owners achieve their business and related goals. A keen fisherman and brewer, I love a beer in the weekends after a day with my young family.
I have a Bachelor of Business Studies with majors in Accounting and Marketing. I’m a Chartered Accountant and holds a current certificate of public practice.
Rachel Darlington – Partner
I began my accounting career in the corporate arena working for a merchant banking firm for approximately ten years. I joined Business Like in February 2008. In 2009 Rachel Lamb and I joined forces to create Business Like NZ Ltd. In 2014, I teamed up with Brendan Price and have continued to grow Business Like NZ Limited. I have a farm in Ardmore where most weekends I’m tending to the land or my ever-growing menagerie of animals.
I am a Chartered Accountant and hold a current certificate of public practice. My qualifications include a Bachelor of Commerce and a postgraduate diploma in Professional Accounting.
Vinh Nguyen – Partner
With over 15 years of experience working in CA Firms, I bring a wealth of knowledge and expertise in the areas of business advisory, compliance and taxation. As an experienced client manager, my focus is on fostering and maintaining strong client relationships. I have two children and enjoy travelling and going to live music events.
I’m a Chartered Accountant (CA) with a Bachelor of Commerce, majoring in Accounting and Commercial Law.