Frequently asked questions
What home office costs can I claim?
If you have an office at home, you will be able to claim a portion of your household costs paid.
These costs include:
- Insurance (house and content)
- rent (if you do not own your home)
- repairs and maintenance
- security/alarm system monitoring
- telephone and Internet
- the interest costs on your mortgage (but not the principal repayments)
The proportion claimed as a tax deduction should reflect the area of the house used for the home office.
You can determine the apportionment based on the floor space area used for the office, divided by the total area of the house.
For example, if the office is 20 sqm and the house is 200 sqm, then the percentage you would use is 10%. That means 10% of the total costs of the house can be used as an expense of the business.
What entertainment expenses can I claim?
Usually entertainment expenses (meals and drinks consumed off the office premises) are 50% deductible. If you bring food or drinks into your office e.g. because people are working late, then it is usually fully deductible.
If you are travelling for work (i.e. out of town), your accommodation and associated costs e.g. meals, are fully deductible.
If while travelling you pay for meals for work related guests, then the cost of the meal is only 50% deductible.
Additional information is contained in IRD’s IR268 booklet on entertainment.
See additional fact sheet.
What are the provisional tax dates?
Provisional tax is not a separate tax. It is simply paying your income tax as the income is received through the year.
You pay installments based on the prior year tax return filed for the business. If the current year income of the business differs from the prior year results, you may need to file an estimate with the IRD if you need to reduce the level of tax you need to pay, or you can pay voluntary tax payments if you need to increase the level of tax to be paid. The amount of provisional tax you pay is then deducted from your final tax bill at the end of the year.
The number of times you need to pay provisional tax each year depends on the option you use to calculate your provisional tax, and how many times you pay GST (if registered for GST).
If you have a 31 March balance date (ie your tax year ends on 31 March), your provisional tax due dates are:
If you’re not registered for GST
If you’re registered for GST and pay monthly or two-monthly
If you’re registered for GST and pay every six months
If you’re registered for GST you pay your provisional tax and GST at the same time on a combined GST and provisional tax return.
If you have another balance date (ie your tax year ends before or after 31 March) check with us as to your due dates.
You can pay provisional tax based on your GST taxable supplies for each two-month period. You'll make six provisional tax payments of differing amounts depending on your taxable supplies during each two-month period.
IRD calculate the ratio percentage and you multiply this by your previous two months GST taxable supplies to get the amount of provisional tax you need to pay.
You need to meet certain criteria to be eligible to be on the ratio method. You must be a provisional taxpayer in the prior filed year and be registered for GST.
In order to use the ratio method we need to apply to IRD prior to the start of the income year.
Can I claim motor vehicle expenses?
If you wish to claim motor vehicle expenses and you are a sole trader/partnership (and the vehicle you are using a may be used for carrying passengers) then you must keep a log book for 3 months to record the percentage of usage that is work related.
You can then claim that percentage of the associated vehicle costs e.g. depreciation, petrol, registration, insurance, warrants of fitness, repairs, tyres etc. Your three month log book will last for 3 years but needs to be redone if your usage changes by more than 20%.
Self employed can calculate the proportion of business use of the motor vehicle based on a mileage rate. To do this you need to keep a logbook continuously and are restricted to 5,000 km.
If operate through a company, then it depends who owns the vehicle. If you personally own the vehicle you can be reimbursed for the actual costs based on a logbook of private vs business use or you can be reimbursed for the business km’s travelled using IRD mileage rates. When being reimbursed for business travel in excess of 5,000 km you will need to consider whether the mileage is a reasonable estimate of the actual costs.
If the company owns the vehicle you can claim 100% of vehicle costs. However, FBT may need to be paid.
Are IRD penalties tax deductible?
No deduction is available.
Is Use of Money Interest charged by the IRD tax deductible?
UOMI is deductible for tax purposes (from the year ended 31 March 2011) for all entities and individuals with the deduction being claimed in the year the UOMI was paid.
UOMI received is taxable and UOMI paid is deductible.
How do I calculate the GST component at 15%?
For GST at 15% the fraction is 3/23
For example :
Lets assume the price of an item is $1,000 plus GST (or $1,150 including GST).
The GST component would be $1,150 x 3 / 23 = $150
The GST exclusive price would be $1,150 x 20 / 23 = $1,000?
Are all donations made tax deductible?
Only donations made to approved charitable organisations are deductible.
Donations made by a company/business or individual are deductible to the extent that the total value of the donation does not exceed the taxable income of the company/business or individual in that income tax year.
i.e. If the taxable income for a company is $6,000 (before deducting the donations as an expense), donations up to $6,000 can be claimed. If an individuals taxable income is $6,000, then an amount up to $6,000 can be included in the rebate return.
Entertainment expenditure - gifts of food and drink
The entertainment expenditure rules in subpart DD of the Income Tax Act 2007 limit tax deductions for certain types of expenditure to half the deduction normally available. One type of expenditure covered (with exemptions) is expenditure on providing food and drink off business premises. This means that spending on things like chocolates or a bottle of wine to give as gifts to customers, clients or suppliers for example, will not be fully deductible. If the items are purchased as a gift basket or together with other items that aren’t food and drink, the expense must be apportioned between fully deductible and not fully deductible.