Question

Can a self-employed person claim expenditure deductions on the following: (refer to the Income Tax Act 2007) NZ
1-Professional society/membership relating to their work
2-Computer to be used for their work
3-Professional work wear - not uniform
4-Travel expense on taking train to and from work

Suzie Kaur is a self‐employed accountant. She incurred the following expenses:
i. She is a member of a professional accounting society for which she pays an annual fee of $950.
ii. Suzie’s work requires her to dress professionally so she spent $1,500 on designer work suits.
iii. She purchased a computer for $3,200 that she uses for her work as an accountant.
iv. Suzie takes a train between home and work and spends $90 per week on tickets.

Required: Advise Suzie whether the above four items of expenditure are deductible. Provide references to relevant sections of the ITA 2007 for each.

Answer 1

1-Professional society/membership relating to their work:

Subscription should be tax deductible if it is related to the work.

Therefore annual fee of $950 paid towards membership of professional accounting society is a tax deductible expenditure.

2-Computer to be used for their work:

  There are several home office expenses you may be able to claim as tax deductions, which includes computer consumables.

Purchase price of computer $3,200 is tax deductible.

3-Professional work wear - not uniform

If you bought occupation-specific clothing, protective clothing or work uniforms specifically related to your job, you may be able to claim these costs, as well as related cleaning costs, as work-related expenses.You can claim a deduction for occupation-specific clothing. This means it is specific to your occupation, is not everyday in nature and allows the public to easily recognise your occupation.

Payent made for purchase of designer work suits is not tax deductible since she can make use of this dress when you are not in office.Therefore $ 1,500 is not eligible to deduct.

4-Travel expense on taking train to and from work

To qualify as a tax deduction, business travel must last longer than an ordinary workday, require you to get sleep or rest and take place away from the general area of your tax home (usually, outside the city where your business is located).While you generally can’t claim expenses for getting to and from your regular workplace, there are some work-related vehicle and travel expenses you may be able to claim.

Here expense incurred to travel between home and business, so it is not tax deductible expense.