What business expenses can I claim?

What Business Expenses can I

Claim?

Finance Advice Guides

By Monteck Carter

Contact Us To Energise YOUR Business:09 273 3682

Contents

2 What Business Expenses Can I Claim?

3 Who is Monteck Carter?

4 Summary of Expenses I can Claim

6 Home Office Expenses

7 Tax Allowance for Meals and Accommodation

9 Companion Travelling Expenses

10 Motor Vehicle Expenses

11 Entertainment Expenses

13 Christmas Party

Who is Monteck Carter?


It’s easy to live life with energy and passion when your business runs well. Monteck Carter knows that your business needs to be energetic and efficient in order to thrive.

Like the best athletes - you and your business need a regime to be business fit. This doesn’t mean strenuous financial workouts and long nights crunching numbers, but building a partnership with experienced business advisors to achieve financial stability

and freedom.

Improving profit margins and ensuring day to-day compliance with tax, GST and other key financial considerations gives you the breathing space to focus on other aspects of the business and frees up time to spend with family and friends.

Monteck Carter believes in partnerships and strong financial advice that enhances every aspect of your business and lifestyle. We know finance to be the backbone of any business, so we ensure you have solid financial structures in place for business growth.

Effective and professional relationships are based on mutual trust, support and integrity.

So we get to understand your needs, tailor unique business solutions that fit you and

build a firm platform for future success.

Our success is driven by your:

– Vision

– Values

– Culture

– Position in the market

– Opportunities

– Threats

– Success

A trusted advisor that understands

your business


If the expense was incurred as a result of you operating your business and you keep the correct records then you can claim it”

The following is a list of some of the common expenses you can deduct from business or rental income:

• Accounting fees

• Fixed asset depreciation

• Interest on loans for business assets or operations.

• Legal fees (now allowable up to $10,000 without restriction)

• Insurance – business related (not life or personal insurance)

• Rent and rates for business premises

• Repairs and maintenance

• ACC Levies

• Running costs such as :1.Printing2.Stationery3.Postage4.Telephones – Mobile and Home5.Broadband6.Computer costs etc.7.Advertising

• Client Gifts

• Staff or Personal Training

• Overseas Training

• Dry-cleaning/ Laundry

• Clothing

• Marketing

• Wages

• Travelling Expenses

• Meals

• Entertainment

• Home office expenses 1.Heating2.Lighting3.Rates4.Insurance5.Mortgage interest6.House and contents

insurance7.Repairs and maintenance

• Motor vehicle expenses 1. Mileage2. Servicing3. Wof & Rego4. Insurance5. Repairs and Maintenance

What Expenses can I Claim?

One of the most frequent questions we get asked as accountants are "What expenses can I

claim?"

The answer to this is basically "Anything that you spend which is directly related to you

earning your income". There are some obvious expenses which are a no-brainer and then

there are the ones you think "well I do need this for business".

……BUT the question is did you purchase it as a result of being in business?

Alternatively we do believe that someone who edits books or drives trucks and needs glasses to be able to read or see in the distance does have a reason to claim and we would argue that in this case it is directly related to earning their income.

So they may be able to claim glasses as a business expense.

If you are not sure we are happy to talk it through with you .

Give Karen a call (09) 2733682

I need my reading glasses to look at the computer so they

must be a business expense" BUT are they

specifically required to earn your income?

The IRD says no, this is a

personal expense.


Home Office Expenses

• Heating

• Lighting

• Rates

• Insurance

• Mortgage interest

• House and contents insurance

• Repairs and maintenance

• An office or office area

• A storeroom or storage area

• A workshop

• A garage or part of a garage which is used to house a business vehicle

Our Advice

Do the maths, and think laterally.

Most people who are self

employed find that it is

impossible to completely

separate business life from home

life. Keep written workings of

your calculations, and be sure to

keep records of your outgoings

in a safe place


Where a self-employed taxpayer uses his or her home partly in furtherance of the conduct of a business, he or she is entitled to a partial deduction for the outgoings which relate to the use of the home for the work related activities. These include:-

The portion of outgoings deductible is based on the area used for the business, expressed as a percentage of the total area of the home:

• Area used for business purposes• Total area of home

It is not absolutely necessary to set aside a specific room for business purposes, nor is it necessary for your home to be physically changed to suit the business. However in cases where a separate room is not set aside, it may be appropriate to apportion the outgoings based on criteria such as the amount of time spent on income-earning activities at home as well as the area used.

Examples of areas likely to be used for business purposes include:

Tax Allowances for Meals and Accommodation

mployee accommodation and related expenses

Sets time boundaries around expenditure on accommodation etc paid

for employees rather than base claims on facts like whether the

employee has a house to maintain.

(Special rules apply for Canterbury)

There are three tests:

Two year time limit - short term job

The job is expected to take less than 2

years. You can claim employee costs

for up to two years. Three year time

limit - long term project The example

provided is building a dam. The project

is expected to take more than 2 years

so you can claim expenses on

employee accommodation etc for up 3

years.

If circumstances change

If, for example, the employee decides to buy a house in the area where he/she works,

the allowances cease to be tax deductible. There are also anti avoidance rules. You

can't make the costs part of a salary package.

Timing and details

Most of the proposed amendments

will apply from 1 April 2015.

However, there will be a choice of

applying the revised

accommodation rules to

accommodation arrangements put

in place on or after 1 January 2011,

subject to meeting certain

conditions


E

There is a new way for determining the extent to which accommodationexpenses, meals et cetera can be claimed as tax deductible due to the recent Tax Bill.


Continued…

Conferences and training

Sometimes the employees could get home at night. However, if they are required to stay for team building or similar reasons, the costs are fully tax deductible.

Multiple workplace rule

The example given is an employee who manages offices in Christchurch and Dunedin

(home town). Costs relating to being in Christchurch are deductible without a time

limit

What if costs become taxable?

The general rule is market value. However, this can be unrealistic if it is an overseas posting. In this case apply market value in the area the employee lives.

Meals and light refreshments

Three months maximum when employee is away from home. Reimbursements and allowances allowed. The rules also cover conferences, when the employee is not away from home.

Companion Travelling expenses


This Questions considers the deductibility of a companion's travel expenses. It only applies to individuals, sole traders and partners in partnership. It does not apply to companies where different rules apply (eg FBT and dividends). It applies from the 2014 income year and subsequent year.

Basically, a deduction may be permitted for a companion's travel expenses where a companion accompanying a taxpayer on a business trip supports the taxpayer, to a reasonably substantial degree, in the business being undertaken.

If these qualities are present, then the Commissioner considers a sufficient nexus will exist between the companion's travel expenses and the taxpayer's business or income-earning activity

The companion does not need to be an expert in the affairs of the business but they do need some knowledge of the business being undertaken or they must possess some special skill or expertise to be able to provide support in a material way.


Motor vehicle expenses are generally deductible for Income Tax purposes, if the vehicle is used for business purposes. If the vehicle is not used exclusively for the business then you are not able to claim 100% of the vehicle expenses. There are two ways to make a claim for vehicle expenses where the vehicle is not 100% business:

1. The easiest way is to record trips and claim a mileage rate:

To do this you need to note down how many times you have travelled a certain distance in a week/month/year.

For example: You consider your place of work is your home and you have to visit the office once a day. Distance from home to office –10kms x Number of trips per year – 200 This gives you a claim of 2,000 km for year

Then using your diary review your appointments – note down next to each appointment the approximate mileage. You can claim up to 5,000km per year at 77c/km ($3,700) by keeping these records. If you travel more than 5,000km in the year you need to keep a record of actual expenses.

The only down side to this is if you are gst registered there is

no gst claim on mileage.

Last chance to claim

If no records are kept, and the vehicle has an element of private use, then the maximum amount able to be claimed for income tax purposes is 25%.

If you own a vehicle through a company.

different rules apply…

“This is a complicated area and we want you to get it right, please call us if you have any queries at all as to whether you can make a claim”.

Motor Vehicle Expenses

2. Alternatively you can keep a 3 month log book The log book gives you a percentage of business use over personal use. Once you have ascertained a percentage of business use then you can claim that percentage on all monies spent on the vehicle. The same percentage is used for claiming gst

Remember if you are gst registered you can claim the gst on the cost of your vehicle. If you are using a vehicle you owned prior to going into business, as long as you can show proof of payment on this vehicle, you can claim the gst back on the current market value.

The log book is kept for a three-month period every three years. If the use of the vehicle or the nature of the business changes over that three-year period, then another trial period of three months must be done.


This is a complicated area and the rules can be messy but if you use the following simple rules claims should

be maximised.

Entertainment expenses are only 50% claimable under certain circumstances, so firstly stay away from those circumstances or use them to your advantage.

Entertainment relates to the provision of food or drink for staff, clients or prospective clients.

For further information download the IR268 booklet about entertainment off the IRD website

www. ird.govt.nz

Rule FourIf you give client gifts of wine or food you may be caught under the entertainment rules. Gifts of voucher’s, flowers or other items are not caught.

Rule FiveEnsure your dinners are business related and you can claim 50% of them.

Rule SixManage what you do – a shout for all staff on the premises is fully deductible, shouting staff food and alcohol off the premises is only 50% deductible.

Rule Seven

Entertainment off shore is 100% deductible Remember you must keep records of all entertainment claims and who was involved to prove business relativity.

Rule One

Don’t call an expense entertainment if

it is not. If you are marketing a

product, attending a conference,

advertising your services – ensure

you allocate these to the correct

expense.

Rule Two

If you are travelling for work and have

to pay for meals and drink, this is

travelling expenses not entertainment.

Rule Three

If you want to take clients out for

dinner (which is only 50% deductible)

take them individually rather than a

group: a deduction for a large group is

say 50% of $500 = $250, but you only

had one dinner out if you take the

client’s separately 50% of say 5

dinners at $100 is the same $250

claim - you had five dinners out.

If you're thinking of a more public event to promote the business during the festive season, expenditure on food, drink and all the necessary incidentals could be fully deductible.

However, be aware that the event can't cater for your VIPs alone. It must be open to the public on the same footing as clients or business contacts. Its primary purpose must be as a marketing event for the business.

If you're planning an event and you're not sure which tax regime it will fall under, please contact us on 09 273 3682 for more information.


Christmas Party Expenses

As the festival draws near you might be planning a Christmas function for special clients and/or suppliers and business contacts and you may be wondering what expenses you can claim. These expenses will come under the entertainment regime for purposes of tax deductibility.

Any expenditure for food and drink that your business provides off your business premises will be 50% deductible. This extends to any incidental expenditure on things like the hiring of crockery, glassware or utensils, waiting staff, and music or other entertainment provided for the function you're planning.

Give us a call to see how we can help you:

09 273 3682www.mc2ca.co.nz

Our Success is defined by our customers success along with our extensive industry experience in these sectors

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What business expenses can I claim?

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