New rules on GST invoicing apply from 1 April 2023. These changes have been designed…
Planning a summer business trip with a personal holiday tacked on the end? Renting out the bach and unsure what expenses can be claimed? Whatever your situation, we want to make sure you’re getting the expense claim tax break you’re entitled to.
Here’s the lowdown on legal costs for trust admin, travel expenses, mixed-use assets and sponsorship.
Facing a legal bill for your business or trust? Good news.
Generally speaking, you can deduct any business-related legal expenditure carried out by your company and/or trust if total legal expenses incurred are less than $10,000 in a tax year.
Examples of deductible claims include: expenses relating to protecting trade secrets of the business, opposing the extension of a competitor’s patent, defending an allegation of an infringement of copyright, defending traffic infringements brought against company employees while on company business, and costs for appointing company directors.
Travel expenses – what can I claim?
If your business involves hitting the road, you can claim business travel as an expense. The best way to prove the business portion of your travel expenses is to keep a diary of your travels. Hang on to your itinerary, invoices and tickets. Jot down the reasons for the trip, date of the trip, and costs of any car hire, air/bus/taxi fares, accommodation, meals and incidentals, as well as the time spent on business and non-business activities.
Mixing business with pleasure? If your trip contains a private or capital element you can claim a 100% deduction (where the holiday aspect is incidental to the work element) or an apportionment (where there are two purposes for the trip, both truly separate). If the work side of things is just incidental to the holiday, no deduction can be made.
Got a bach? Claim away.
If your holiday home is being used privately and for income-earning purposes (and is also unused for 62 days or more) you can claim mixed-use expenses. There are three categories to be aware of:
Fully deductible expenses: You can claim 100% of any expense solely for the income-earning use of the asset. For example, costs of advertising for tenants for your bach.
Non-deductible expenses: You can’t claim any expenses for the private use of the asset. For example, the cost of a jetski stored in a locked garage that’s unavailable to bach renters. You also can’t claim expenses such as improvements (adding on a carport, or upgrading the bathroom).
Apportioned expenses: If an expense relates to both income-earning use and private use, you need to apportion it using this formula:
- Expense x Income Earning Days/Income-earning days plus counted days (private)
These rules can be a little complicated, especially if a company is involved in the mix, so it may pay to come and have chat to sort out how they apply to your business specifically.
When is sponsorship fully deductible?
For sponsorship to be fully deductible, your business must be promoted and any element of private enjoyment must be incidental.
Sponsorship examples that are fully deductible:
- Sponsoring $2,000 towards the local hockey team’s new uniforms and in return, the team agrees to display your business logo on the uniforms.
- Sponsoring $10,000 towards the Taupo Relay for Life and in return, the organisers agree to advertise your business across all promotional materials.