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Business Expenses Guide — Allowable Deductions for NZ Businesses

the deductible business expenses in New Zealand. The guide covers the general deduction rules (the "nexus test"), the specific deductions (the home office, the vehicle, the travel, the equipment), the capital vs revenue distinction, and the non-deductible expenses.

General Deduction Rules

The business expenses are deductible if they meet the "nexus test" — the expense must be incurred in the production of the assessable income. The general principles include: (a) the revenue expenses are deductible in the year they are incurred, (b) the capital expenses are capitalised and depreciated over the useful life (the "depreciation" at the IRD-prescribed rates), (c) the private expenses (the personal living costs) are not deductible, and (d) the mixed-use expenses (the home office, the vehicle) must be apportioned between the business and the private use.

Specific Deductions

The common specific deductions include: (a) the home office — the proportion of the rent or the mortgage interest, the rates, the insurance, the power, the internet (calculated using the "square metre" or the "time" basis), (b) the vehicle expenses — the IRD kilometre rate of $0.95 per km (the "reimbursement rate") or the actual costs per the logbook, (c) the equipment — the low-value asset write-off (the assets under $5,000) or the depreciation at the IRD rates, (d) the professional fees — the accounting, the legal, the consulting, (e) the travel and the accommodation — the business-related travel costs, and (f) the advertising and the marketing — the digital and the traditional advertising costs.