You probably know by now that most costs that you incur and are necessary to run your business are tax deductible – but hold off from the shopping spree! Some might catch you off guard by not being tax-deductible, while others might surprise you that they are legitimate business expenses.
Hospitality accounting
It’s pretty nifty that an expense you incur can be claimed even before you pay for it. However, some costs may not be fully claimed in the year you incur them, if they provide you with future benefits, such as high value prepaid insurance.
Be careful when spending for items with a personal flavour to them as well. While Inland Revenue won’t tell you which items you should spend your money on, you can’t just go on a dinner date, call it an official business meeting, and be allowed to claim the cost.
Some may look necessary to run a business, but are considered private in terms of tax deductibility rules:
– travel to and from work
– office clothes
– business set-up fees
– overseas trips with non-working partners
– costs related to machinery installation, and
– debt repayment
On the other hand, capital expenses that have an ongoing benefit to your business for years are considered fixed or non-current assets and only a proportion of their cost each year is claimable as depreciation.
If you use part of your home for business, IRD will accept a claim for its costs, and you can work it out through a percentage of your total home. For example, if you want to claim power, you need to get the percentage of your home that’s used for business and get that percentage from your total power bill, so you can claim it.
Other tax deductions for businesses:
– Insurance
– Rates
– Loan interest
– Repairs and maintenance
If you use the garage for business, you can include this area in the business share of costs as well. If you don’t own the house, you can claim for rent in place of mortgage interest. Remember to keep your invoices relating to the above expenses, as you can claim GST on these.
Other business tax deductions include motor vehicle expenses, telephone and Internet, entertainment, parking costs, interest, of course as well as any purchases and costs of goods sold that relate directly to your hospitality business.
Our last tip would be to pay as much as you can using your business bank account and keep a notebook for petty cash items. Record the amount, date and nature of the cost and keep the receipts.
If you’re not sure what to make with all this information, give us a bell and let us give you a hand with your tax compliance – we’re experts!
Your Outside Team
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Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
