What Can I Claim on Tax in NZ? The Complete Deductions Guide

"What can I claim?" is the question we hear most often from new clients — and the honest answer is: probably more than you think.

New Zealand's tax system allows you to deduct expenses that are incurred in earning your income. The rules differ depending on whether you are an employee, a contractor, a landlord, or a business owner. This guide covers all four.

IRD's test is straightforward: an expense is deductible if it is incurred in the course of earning your taxable income. It must be:

• Genuinely incurred — you actually spent the money
• Connected to earning income — not a private or domestic expense
• Not capital in nature — you are buying something that gets used up, not a long-term asset (capital items are handled through depreciation instead)

If an expense is partly private and partly business, you can claim the business portion only. The split must be reasonable and defensible if IRD asks.

Most employees cannot claim much — because their employer covers most work-related costs. But there are exceptions.

• Clothing (even if you only wear it for work, unless it is a uniform or protective gear)
• Commuting costs (travel from home to your regular workplace is private)
• Meals and entertainment (unless you are away from home overnight for work)
• Tools and equipment (if your employer provides them or reimburses you)

Home office expenses — If you work from home regularly and have a dedicated workspace, you can claim a portion of your home running costs: power, internet, rent or mortgage interest, rates, and insurance. The portion is calculated based on the floor area of your workspace as a percentage of your total home area. Read our full home office guide.

Professional subscriptions and memberships — Annual fees for professional bodies (e.g., NZICA, NZMA, a trade association) that are required for your job are deductible.

Work-related tools and equipment — If you buy tools, equipment, or software that you need for your job and your employer does not reimburse you, you can claim the cost. Items under $1,000 (excl. GST) can be written off immediately; items over $1,000 are depreciated over time.

Work-related education and training — Courses, seminars, and professional development that maintain or improve skills you use in your current job are deductible. Training for a completely new career is not.

Union fees — Annual union membership fees are deductible.

Charitable donations — Donations of $5 or more to an approved donee organisation qualify for a 33.33% tax credit — not a deduction, but a direct reduction in your tax bill. Keep your receipts and claim via an IR526 or through myIR.

If you are self-employed or contracting, you have access to a much wider range of deductions. These reduce your taxable income before your tax is calculated.

You can claim vehicle costs in two ways:

Logbook method — Keep a logbook for 90 consecutive days to establish your business-use percentage. You then claim that percentage of all vehicle running costs: fuel, insurance, registration, WOF, repairs, and depreciation. Read our vehicle logbook guide.

Kilometre rate method — Claim a set rate per kilometre for business travel. IRD sets the rate each year (currently 83 cents per km for the first 14,000km, then 31 cents). No logbook required, but you must keep a record of business trips.

You cannot claim commuting (home to your regular workplace). But if you work from home and travel to a client site, that travel is deductible.

Same rules as employees, but contractors can also claim a portion of mortgage interest (not just rent), rates, and insurance. The floor-area percentage method applies.

Computers, phones, monitors, desks, chairs, and any other equipment used for work. Items under $1,000 (excl. GST) are immediately deductible. Items over $1,000 are depreciated — typically over 3–5 years depending on the asset type.

If you use equipment for both work and personal use, you can only claim the business portion.

Xero, Microsoft 365, Adobe Creative Cloud, project management tools, cloud storage — any software subscription used in your business is fully deductible.

If you use your personal phone and internet for work, you can claim the business-use portion. A 50–80% business-use split is common for contractors, but it needs to be reasonable and based on actual usage.

Accounting fees, legal fees, bookkeeping costs, and tax agent fees are all deductible. This includes the cost of having your tax return prepared.

Business insurance, professional indemnity insurance, and public liability insurance are deductible. Personal life insurance is not.

Courses, conferences, books, and subscriptions to professional publications — as long as they relate to your current work.

Website costs, Google Ads, social media advertising, business cards, brochures, and any other marketing spend.

Bank fees on your business account are deductible. Interest on a business loan or overdraft is deductible. Interest on a personal loan used for business purposes is also deductible (but you need to be able to demonstrate the connection).

Flights, accommodation, and meals when travelling for business purposes (away from your regular work location overnight). Keep receipts and a record of the business purpose.

This is one of the most misunderstood areas. Meals and entertainment are only 50% deductible in New Zealand, even when they are genuinely business-related. The 50% rule applies to client lunches, team dinners, and similar expenses.

Meals when travelling overnight for work (away from home) are fully deductible.

If you pay subcontractors or employees to help with your work, those costs are deductible. Make sure you have proper records — invoices from subcontractors, and payroll records for employees.

Rental property expenses are deductible against your rental income. If your expenses exceed your rental income, you have a rental loss — which can be used to offset other income in some circumstances.

• Interest on your mortgage — subject to the interest limitation rules (see below)
• Rates and insurance
• Property management fees
• Repairs and maintenance — work that restores the property to its original condition (not improvements)
• Accounting and legal fees related to the rental
• Advertising for tenants
• Travel to inspect or maintain the property
• Depreciation on chattels (appliances, carpets, curtains) — but not the building itself

From 1 April 2024, interest deductibility on residential rental properties was fully restored for new and existing properties. This reversed the restrictions introduced in 2021. You can now claim 100% of mortgage interest on residential rental properties.

• Capital improvements — adding a new bathroom, extending the property, or making structural changes. These are capital expenditure and are not immediately deductible (though they may affect your cost base for bright-line purposes).
• Private use — if you use the property yourself for any period, you must apportion expenses accordingly.

For more detail, see our rental property tax guide.

Everything contractors can claim, plus:

If you sell products, the cost of buying or making those products is deductible. This includes raw materials, manufacturing costs, and freight in.

Assets over $1,000 (excl. GST) are depreciated over their useful life. IRD publishes depreciation rates for hundreds of asset types. Common examples:

The diminishing value (DV) method applies the rate to the asset's current book value each year. The straight-line (SL) method applies a fixed amount each year. You choose which method to use when you first claim depreciation on an asset.

Assets costing $1,000 or less (excl. GST) can be written off in full in the year of purchase. This threshold was temporarily raised to $5,000 during COVID — it has since returned to $1,000.

The value of unsold stock at year end is taken into account when calculating your taxable income. If your closing stock is lower than your opening stock, the difference is deductible.

If a customer owes you money and you have genuinely given up on collecting it, you can write it off as a bad debt deduction. You must have previously included the amount in your income and taken reasonable steps to recover it.

Qualifying R&D expenditure may be eligible for a 15% tax credit under the R&D tax incentive scheme, in addition to being deductible as an expense.

Private expenses — Groceries, personal clothing, family holidays, and personal entertainment are never deductible, even if you occasionally discuss business during them.

Fines and penalties — IRD late payment penalties, traffic fines, and similar costs are not deductible.

Income tax itself — The tax you pay on your income is not a deductible expense (though some other taxes, like rates and FBT, are).

Capital expenditure — Buying a building, purchasing goodwill, or acquiring a long-term asset is capital expenditure. It is not immediately deductible, though it may be depreciable.

Expenses without records — IRD can disallow any deduction you cannot substantiate. Keep receipts, invoices, and bank statements for at least seven years.

You must keep records that support every deduction you claim. IRD can audit returns up to four years after filing (longer if they suspect fraud).

Acceptable records include:

• Receipts and invoices (paper or digital)
• Bank and credit card statements
• Vehicle logbooks
• Mileage records
• Contracts and agreements

Digital records are fine — you do not need to keep paper copies if you have a reliable digital backup. Apps like Dext, Hubdoc, or even a well-organised folder of scanned receipts are acceptable.

Employees — Most employee deductions are claimed through your end-of-year tax return or by filing an IR3. Charitable donation credits are claimed via an IR526 or through myIR.

Contractors and self-employed — Deductions are claimed in your IR3 return, filed by 7 July (or 31 March the following year if you have a tax agent). You report your gross income and subtract your expenses to arrive at your taxable income.

Companies — Deductions are claimed in the IR4 company tax return. Your accountant will prepare this as part of your annual accounts.

The saving depends on your marginal tax rate. If you are in the 33% bracket and you find $5,000 of legitimate deductions you were not claiming, that is $1,650 back in your pocket. At the 39% rate, the same $5,000 saves you $1,950.

For most small business owners and contractors, a good accountant pays for themselves many times over — not just by finding deductions, but by structuring your affairs correctly so you are not overpaying in the first place.

If you want to make sure you are claiming everything you are entitled to, book a free 30-minute consultation with Eastmure & Associates. We work with contractors, landlords, and small business owners across Canterbury and New Zealand.