EXPENSES • 24 FEBRUARY 2022 • 7 MIN READ

An expert guide on claiming business expenses

A person is checking expenses receipts against the record in the accounting software

SECTIONS

Typically claimable

Sometimes claimable

Definitely not claimable

International travel

Rental properties

It’s in every business owner’s best interest to track and claim all of their expenses. The higher your business expenses, the lower your profits. And that means less tax to pay.

With that in mind, we use a rule of thumb for identifying which costs can be claimed as business expenses: if an expense is related to the generation of revenue, it can be claimed.

The nature of your business is also a factor. For example, a media production company will be able to claim Netflix and Sky TV subscriptions as expenses (they are critical for research), but a construction business won’t.

With that broad understanding, let’s break down examples of what’s claimable and what isn’t.

Typically claimable

Anything you purchase to sell to clients and/or customers
Accounting fees
Accident Compensation levies
Advertising
Bank fees and credit card charges
Commission paid to others to sell your products/services
Computer / software / internet expenses
Consultancy fees
Contractors and subcontractors
Depreciation on business assets
Freight
Health and safety costs
Insurance on business assets
Interest on loans and overdrafts
Legal fees – if less than $10,000 and business-related
Licenses, registrations, and subscriptions
Office expenses - Light, heat, and power / Milk, tea, coffee, biscuits for staff / Cleaning and toiletries / Telephone
Postage
Printing and stationery
Protective clothing
Rent and lease of assets
Salaries and wages
Training and courses
Travel (national and international)

Sometimes claimable

Entertainment

Gifts (and vouchers) of food and drink – 50%
Social events – 50%
Office shouts – 50%
Sports or cultural events – 50%
Light meals for meetings – 100%
Food and drink provided at a conference or similar event – 100%

Repairs and maintenance

Repairing an asset to return to its original state
Maintaining an asset to ensure its continued operation
Rectifying general wear and tear
Cleaning, rubbish disposal

If the transaction increases the asset’s value beyond the initial purchase price, it cannot be claimed as an expense. It’s instead considered to be part of the asset and depreciated.

Assets used in the business

Assets costing less than $1,000 can be deducted immediately from income. Items above this threshold must be capitalised in your fixed asset schedule, and depreciated (written off over a number of years).

Use of (part of) your home as an office

If you can show there is part of your home used primarily for your business, you can claim a portion of your house-related expenses. These can include

Rent
Mortgage interest
Electricity
Rates
Insurance (home and contents)
Telecommunication bills

The amount you can claim is dependent on the floor area dedicated to business. For more info, check out our article on claiming home expenses.

Motor vehicle expenses

Fuel, servicing, WOF, road user charges (RUC), and insurance can all be recorded as business expenses. That said, you must make an adjustment if the vehicle is available for personal use or being used privately
You can reimburse employees if they personally pay for any motor vehicle expenses.
If an employee uses their own vehicle for business, you can reimburse them based on the number of business kilometres travelled, or on actual costs incurred.
You can provide your employees with a vehicle allowance.

Because adjustments and reimbursements can be difficult to calculate, this is one of the times where it pays to have an accountant!

Legal fees

If less than $10,000 and for business purposes – deductible
Advice on property leases and registration fees – deductible, even if above $10k
Tax advice, calculations, and litigation costs – deductible, even if above $10k

Expenses paid personally

Perhaps you’ve used a personal credit for business expenses like travel or online purchases. All you need to do is make a list and send it to your accountant.

Make sure to keep the invoices. While they might not be necessary for your financial statements, the IRD still requires that they be kept for at least seven years.

Definitely not claimable

Many people believe some of the expenses below are business related. They aren’t!

Drawings
Doctor and medical bills
Physiotherapy (even if you’re injured at work)
School fees and childcare costs
Vet bills*
Shoes and clothing if they are suitable for general wear
Gym subscriptions
Personal travel and accommodation

There are also a few business expenses that can’t be claimed for GST or tax deductions:

Parking and motor vehicle fines
Late payment penalties
Any other fines or penalties

*While not claimable for most businesses, there may be some situations where it can be e.g. a farmer can often claim vet bills for livestock.

International travel

You can claim any business expense that’s linked to the production of your business income. However, you won’t be eligible for GST deductions on any part of an overseas trip.

Because your accountant or Inland Revenue could ask for proof that your trip was for business purposes, it’s a great idea to record the following:

the reasons for the trip
the date of the trip
your itinerary
the cost of car hire, and air, bus and taxi fares
the cost of accommodation, meals and incidentals
the time spent on business and non-business activities

As with any business expense, you should retain copies of invoices or tickets.

If a trip is part business, part pleasure, you simply need to claim the relevant percentage or direct costs of the business part of the trip. For example, if your Fiji trip included a week on the beach and a week of client meetings in Suva, you can claim all of the Suva expenses and half of the travel costs (like the airfare).

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Rental properties

Income from residential property rental should not be declared for GST, and any costs shouldn’t be claimed for GST, either.

Property-related expenses

Rates
Insurance
Property management fees
Repairs and maintenance
Travel to and from your property for inspections and repairs

Financing expenses

Mortgage repayment insurance
Loan fees
Interest on mortgage

Legal and consulting fees

Legal fees incurred when buying a rental property (if less than $10,000)
Legal action to recover unpaid rent
Costs for evicting a tenant
Preparation of a tenancy agreement
Accountancy fees
Valuation fee to obtain a mortgage (but not insurance valuations)
Legal fees for selling the rental property (if your total legal fees are less than $10,000)

Non-deductible costs

Mortgage repayments (except interest*)
Interest*
Repairs and maintenance, if it increases the value of the asset
Insurance valuations
Legal fees for selling the rental property (if your total legal fees exceed $10,000)**
Advertising the sale of a rental property**
Real estate commission**

** While not deductible as expenses, these costs will reduce the property’s selling price for tax purposes, which may lead to a decrease in taxable profit.