What are expenses and what does ‘claim’ actually mean?

Expenses are the costs you incur in the day-to-day running of your business. At tax time, your total profit (the amount you need to pay tax on) is your taxable income minus the expenses you can claim — so the more you can claim, the less tax you have to pay.

To ‘claim’ simply means we will use these expenses to offset your total taxable income. 

Business Expenses can generally be described as:

  • Day-to-day expenses for running your business, e.g advertising, buying goods for resale or wages.
  • Expenses on items of a value over $1,000 and that will last longer than 12 months are called ‘Fixed Assets’ These items can only be claimed at a certain percentage each year, this claim is called depreciation.

Most Common Expenses that can be claimed for include:

  • rent paid on business premises
  • depreciation on items like computers and office furniture
  • interest on borrowing money for the business
  • some insurance premiums
  • work-related journals and magazines
  • membership of professional associations
  • subscriptions for work related Apps or Software’s (MSO/GSuite/Xero)
  • home office expenses – a percentage only of household rent, mortgage interest, rates & water, house insurances.
  • work-related mobile phones and phone bills
  • stationery
  • work uniforms, but not office wear. Must be a uniform or protective clothing.
  • tax agent’s fees
  • transport costs and travel for business purposes. 
  • Wages, via PAYE system.
  • Buying goods for re-sale
  • Vehicle expenses – in order to claim 100% the vehicle must be a work related vehicle only, no personal usage. You must have a separate vehicle available for your personal use. A log book is required for three months to establish the business use portion. t’s a good idea to use Inland Revenue’s vehicle logbook template — download this spreadsheet from the Tool for Business website. https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/claiming-vehicle-expenses/use-a-logbook

If you own an investment property, expenses you can claim for include:

  • repairs and maintenance (but not renovations that substantially improve the value of the property)
  • professional services fees, like accountants, lawyers or property managers
  • rates and insurance
  • mortgage repayment insurance
  • vehicle and travel expenses when you travel to inspect your property or do repairs
  • depreciation on capital expenses, like whiteware, appliances or heat pumps
  • legal fees involved in buying a rental property, as long as the expense is $10,000 or less.