Under the New Zealand tax rules the following is a quick summary of what you can claim as tax deductions against the income that you earn as a self employed person. You do not need to be earning income from your writing in order to claim related expenses – IRD criteria is that you treat it as a business, not merely as a hobby. We recommend that you discuss your financial status with a tax agent or accountant.
If you have mixed income (i.e. some wage or salary on which you have PAYE deducted as well as self-employed income and/or expenses) you need to approport out your tax deductions in some cases accordingly. For example, if you have a job that is for 30 hours a week you cannot claim 100 percent of your vehicle running costs if you use the vehicle to go to your job, but you can claim mileage for meetings or research related to your writing.
The list below is not intended to be a complete guide for what you can claim as expenses – do make sure you get some good advice from a Tax Agent or accountant who can look at your situation and help you get the maximum legal deductions available.
You can claim GST back on the purchase of a vehicle in the proportion to which it is being used for your business. You will need to keep a log book for three months every three years to establish your business use percentage. Once you have this figure you can then also apply it to the running costs (petrol, diesel, repairs, WOF, registration). A motor vehicle as a capital item must be depreciated over time.
Alternatively, you can claim actual mileage. You will need to keep a record of the date, distance and purpose of the trip. In this instance, depreciation will not apply.
Repairs and Maintenance
To plant and equipment (e.g. computer), telephone and internet, electricity and rent or mortgage, office or workspace (be careful if you have a home office to be clear about not claiming general improvements to your home). Proportionate use will apply.
Only 50 percent deductible – and it is good practice to keep a diary note of who you entertained and how it was useful to your business.
Books, dvds etc
Books related to what you do or of an educational nature (e.g. a book on running a small business or on screenwriting) are all deductible. So are dvd purchases or rentals, and movie tickets.
Printing and Stationery
Includes paper, ink, postage and photocopy costs.
Your NZ Writers Guild sub, newspaper and magazine subs or costs.
Seminars and workshops
All professional training costs.
Only legal fees for business advice or arranging finance, not for property purchase or unrelated legal advice.
Accountancy and Other Business Advice
Includes contents and vehicle (proportionately), professional indemnity, public liability.
Travel and Associated Costs
Deductible as long as they have a clear business purpose. If you combine travel to attend a workshop with a holiday you will need to apportion costs accordingly.
If you need to borrow money to finance your business the interest portion of the repayments is deductible.
Any capital item you buy for your business must be depreciated over time, not written off in the year of purchase. The general rule is that $500 + GST is capital expenditure. A good rule of thumb is to ask yourself whether you will still be using this item in one year’s time (e.g. a computer, printer, digital camera etc). All items attract varying rates of depreciation and in the first year of purchase you may only deduct depreciation for the months owned in the financial year. If your item, such as a computer, is not wholly for writing-related use you may still claim up to 50% of the capital value for depreciation.