What you CAN and CAN’T claim

We often get asked what expenses can be claimed when running a business. The answer to this is found in section DA1 of the Income Tax Act 2007 with our simplified version below.

Business expenses are any costs you incur as part of deriving assessable income while conducting business activity. These can be the day-to-day expenses of running the business such as purchase of raw materials, wage etc or purchasing of big ticket items such as plant and equipment, computer etc.

List of expenses that CAN be claimed.
  • vehicle expenses, transport costs and travel for business purposes
  • 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
  • home office expenses
  • work-related mobile phones and phone bills
  • stationery
  • work uniforms
  • tax agent’s fees.

There are some general limitations stated under the ITA section DA2 which deny certain expenses from being claimed.

Limitation and what CAN’T claim.
  • Private nature. No personal expense deductions are allowed in business, e.g personal clothes, food etc
  • Exempt income limitation. Any expenses incurrent in deriving exempt income cannot be claimed
  • Employment expenses. No deductions are available for deriving employment income, e.g. travel cost to place of work
  • Withholding tax limitation. This applies to expenses or losses from deriving non-resident passive income. Non-resident passive income means income having a source in New Zealand derived that a non-resident derives.
  • Non-resident foreign source income. Expenses or loss incurred in deriving foreign source income.

Good Record Keeping

It is very important good records are maintained to be able to claim expenses. There are Online accounting software services and mobile phone apps that can help you record receipts and keep on top of your bookkeeping.

It is a requirement to keep records for seven years.

Still confused! At Business Launchpad we can provide more specific advice about claims on your business. Contact us today.