Business purpose and evidence come first
A payment from the business bank account is not automatically a deductible business expense. The cost must have the required connection with earning business income, and private or capital elements may need to be excluded or treated differently. Bookkeepers should capture the facts, attach the evidence and use a clear coding process. Technical conclusions should be reviewed by a New Zealand tax adviser where the treatment is uncertain.
For mixed-use expenses, record the full cost and the method used to calculate the business portion. Avoid posting a rounded private-use adjustment without a supporting schedule. The workpaper should explain the period, source data, calculation and whether GST follows the same proportion.
Home-office costs need a reasonable allocation
Inland Revenue says a business owner using part of the family home for work may claim a portion of household expenses where there is a connection with business income. Potential costs can include rates, insurance, power and mortgage interest, with the claim generally related to the area used for business. Current guidance and available methods should be checked for the relevant year.
Retain the floor-area calculation, household invoices, ownership or rental information and an explanation of how the space is used. Review whether the area is dedicated to the business or shared, and whether the claim covers the full year. The annual accounts file should distinguish home-office costs from ordinary business premises costs.
Vehicle costs require business-use evidence
Inland Revenue states that a vehicle used only for business can generally have its full running costs claimed, while mixed business and private use must be allocated. Travel from home to a normal workplace is generally private. The appropriate method may depend on ownership, use and record keeping, so vehicle treatment should be confirmed with the local adviser.
Maintain a logbook or other supporting record where required, including dates, destinations, purpose and distance. Record fuel, repairs, insurance, registration, finance and depreciation consistently. If multiple vehicles or drivers are involved, use separate schedules. At year-end, reconcile the vehicle expense accounts and fixed-asset register to the allocation calculation.
Entertainment and meals often have partial deductibility
Inland Revenue guidance explains that some business entertainment expenses are only 50% deductible. For a self-employed person, a business lunch with clients is a common example. GST generally follows the income tax deductibility treatment for meal expenses. Other entertainment can be fully deductible or non-deductible depending on the circumstances, and employee benefits may have fringe benefit tax implications.
Code entertainment separately from staff travel, ordinary subsistence, marketing samples and employee welfare so the adviser can review the nature of the cost. Retain the receipt, attendees, business purpose and location. Avoid using one broad “meals” account for every food purchase because the correct treatment depends on facts.
Build an exception report for year-end review
During monthly bookkeeping, flag expenses with missing invoices, unclear business purpose, private elements, capital characteristics or unusual GST. Review director and shareholder spending separately. A year-end exception report is more efficient than asking the adviser to scan every ledger line without context.
Once the adviser confirms the treatment, update coding rules and permanent guidance. This reduces repeated questions while preserving an audit trail. The objective is not to make aggressive claims; it is to produce accurate records that separate clearly deductible business costs from private, capital, partly deductible or technically uncertain expenditure.