Small business tax deductions NZ 2026

What an NZ small business can claim as a tax deduction — home office, vehicle, depreciation, staff costs, entertainment and travel. Each section links to the IRD source. Rates verified 2026-06-06.

Home Office Deductions

If you work from home, you can claim a portion of household expenses. The IRD accepts two methods:

Method 1: Square Metre Rate

Calculate the percentage of your home used exclusively for business:

• Measure your dedicated office space in square metres
• Divide by total home floor area
• Apply this percentage to eligible expenses

Example: 12m² office in a 120m² home = 10% of expenses claimable

Method 2: IRD square-metre rate

The IRD publishes an annual square-metre rate to simplify the home-office claim — it removes the need to track utility and insurance bills separately and covers electricity, heating, insurance and rates. Mortgage interest and rent are claimed separately on the business-use percentage. Check the current year's rate before claiming, as the figure changes annually.

Source: IRD — using your home for business.

Claimable Home Office Expenses

Vehicle Expenses

If you use a vehicle for business, you can claim expenses using one of two methods:

Method 1: Actual Costs

Track all vehicle expenses and claim the business use percentage:

• Fuel
• Registration and licensing
• Insurance
• Repairs and maintenance
• Warrant of Fitness
• Depreciation (see rates below)
• Finance costs (interest on car loan)

Keep a logbook for at least 3 months to establish your business use percentage. Update every 3 years or when usage patterns change significantly. Source: IRD — vehicle expenses.

Method 2: IRD kilometre rate

IRD publishes an annual two-tier kilometre rate: a higher Tier 1 rate for the first 14,000 km in an income year (covering both fixed and running costs) and a lower Tier 2 rate for kilometres above that (running costs only). The exact tier rates change each income year, so check IRD's current published rates before claiming.

This method covers all vehicle running costs including depreciation. Track business kilometres travelled and apply the published tier rates.

Source: IRD — kilometre rates for the self-employed.

Equipment and asset depreciation

Business assets are depreciated over their useful life using either diminishing value (DV) or straight line (SL). Rates are set by IRD Determination DEP1 (general economic rates) and category-specific industry determinations. Common asset categories include:

• Computer hardware — higher DV rate; replacement cycle 3-4 years
• Computer software (capitalised) — similar treatment to hardware
• Office furniture — moderate DV rate
• Motor vehicles — moderate DV rate (separate determination for passenger / commercial)
• Tools and equipment — varies widely by trade and equipment type; some specialist tools depreciate fastest

The exact DV / SL rate for each asset class is published by IRD and is reviewed periodically. Look up your asset class against the IRD determination before depreciating, or ask your accountant to allocate the asset to the right category — getting this wrong is one of the most common year-end adjustments.

Source: IRD — general depreciation rates (Determination DEP1 and category determinations).

Low-value asset write-off

Assets costing $1,000 or less (GST exclusive) can be fully expensed in the year of purchase rather than depreciated. The threshold was temporarily lifted to $5,000 during the 2020-21 COVID response then dropped to $1,000 from 17 March 2021. This is a useful way to claim an immediate deduction on small equipment purchases.

Source: IRD — low-value asset write-off.

Staff and Contractor Costs

• Wages and salaries: Fully deductible including holiday pay, sick leave, and KiwiSaver contributions
• Contractor payments: Fully deductible (ensure you have correct withholding tax documentation)
• ACC levies: Fully deductible
• Staff training: Fully deductible if related to current role
• Staff amenities: Tea, coffee, and kitchen supplies for staff use

Professional Services

• Accountant fees: Fully deductible
• Legal fees: Deductible if business-related (not capital expenditure)
• Bookkeeping services: Fully deductible
• Business consulting: Fully deductible
• Industry association memberships: Fully deductible

Marketing and Advertising

• Website costs: Hosting, domain names, and maintenance are fully deductible. Major development may need to be capitalised.
• Google Ads and Facebook Ads: Fully deductible
• Print advertising: Fully deductible
• Business cards and brochures: Fully deductible
• Signage: May be capitalised if significant value
• Trade show and event costs: Fully deductible

Insurance

Business insurance premiums are fully deductible:

• Public liability insurance
• Professional indemnity insurance
• Business interruption insurance
• Product liability insurance
• Cyber insurance
• Key person insurance (conditions apply)

Travel Expenses

Domestic Travel

• Accommodation: Fully deductible for business trips
• Meals: Deductible when travelling overnight for business
• Transport: Flights, rental cars, taxis, and rideshare for business purposes

International Travel

For overseas business travel, apportion costs if the trip includes personal time. Keep detailed records of business activities conducted.

Entertainment Expenses

Entertainment is generally only 50% deductible. This includes:

• Client meals and drinks
• Corporate hospitality events
• Staff social events (50% deductible)
• Conference dinners

Exception: Light refreshments at meetings (tea, coffee, biscuits) are 100% deductible.

Source: IRD — entertainment expenses.

Bad Debts

If a customer does not pay and you have taken reasonable steps to collect the debt, you can write it off as a bad debt deduction. Requirements:

• The income must have been previously included in your tax return
• You must have made genuine attempts to recover the debt
• The debt must be genuinely uncollectable

What You Cannot Claim

These expenses are NOT tax deductible:

• Personal expenses: Even if paid from a business account
• Entertainment exceeding 50%: The non-deductible portion
• Fines and penalties: Including parking tickets and speeding fines
• Political donations: Not deductible
• Capital purchases: Must be depreciated instead
• Private use portion: Of mixed-use assets
• Income tax: Your own income tax payments

Record Keeping Requirements

The IRD requires you to keep records for 7 years (Tax Administration Act 1994, s.22 — see legislation.govt.nz). Essential records include:

• Invoices (issued and received)
• Bank statements
• Receipts for all expenses
• Vehicle logbooks
• Asset registers
• Employment records
• Contracts and agreements

Related on TaxAccountants.co.nz

• NZ tax deadlines 2026 — when each return is due.
• NZ tax calculator — work out your tax before claiming deductions.
• How much does an NZ tax accountant cost?
• Xero vs MYOB vs QuickBooks NZ — which platform makes year-end easier.