Small business tax deductions NZ: What expenses can you claim in 2025?

Whether you’re a sole trader, manage a small team, or operate a home-based business, understanding what expenses you can claim helps reduce your taxable income and keep more money in your business. This guide covers small business tax deductions in New Zealand for 2025, outlining what expenses you can claim, key tax-saving tips, and how to stay compliant with Inland Revenue (IRD) regulations.

If you’re a tradie, check out The Ultimate Guide to Tradies Tax Deductions for 2025, which covers industry-specific deductions. For more general tax strategies beyond deductions, see How to tackle NZ tax time like a pro – A small business guide.

Note: This guide is designed for self-employed and sole traders. If you operate through a company, your tax obligations may differ. Make sure to check with an accountant to stay compliant.

What is a tax deduction for the IRD?

A tax deduction reduces your taxable income, meaning you pay less tax on your earnings. In New Zealand, the Inland Revenue Department (IRD) allows small business owners to claim deductions for business expenses, as long as they meet specific rules.

When you file your tax return, you subtract eligible business expenses from your total income before calculating how much tax you owe. The lower your taxable income, the less tax you pay.

Example: If your business earns $80,000 in a year but you have $20,000 in deductible expenses, you’ll only pay tax on $60,000.

IRD’s rules for claiming business expenses

To be deductible, an expense must be:

• Directly related to earning income – It must be a genuine business cost, not personal spending.
• Properly documented – Keep receipts, invoices, and records in case IRD requests proof.
• Claimed correctly – If an expense is partly for business and partly personal (e.g., your phone bill), you can only claim the business portion.

What if you’re GST-registered?

If your business is registered for GST, you claim GST separately on your GST return, and deductions on your income tax return apply only to the GST-exclusive amount.

Example: If you buy a laptop for $2,300 (including GST), you claim back the $300 GST on your GST return. Your business expense deduction is $2,000.

Tip: Using accounting software or an app makes tracking expenses and GST much easier.

Tax rate changes for 2024/25

Some income tax rates have changed for the 2024/25 tax year, which could affect how much tax you pay as a sole trader or self-employed business owner. If you’re a sole trader, your business income is taxed at personal income tax rates, so it’s important to know which bracket applies to you.

2024/2025 Income Tax Rates for NZ Small Business Owners

Use IRD’s tax rate calculator to find your exact tax obligations.

Key tax rules for small business owners in 2025

Provisional Tax: If your residual income tax exceeds $5,000, you must pay provisional tax in instalments throughout the year.

GST Registration: You must register for GST if your business earns over $60,000 per year.

Late Filing Penalties: IRD charges interest (up to 4% monthly) on overdue tax payments, so missing deadlines can be costly.

What business expenses can you claim in New Zealand?

While not every cost is deductible, many everyday operating expenses qualify — provided they are genuine business costs and meet IRD’s deduction rules.

Here’s a list of deductible business expenses NZ small business owners can claim in 2025:

1. Business operating expenses

These are the essential costs that keep your business running day-to-day. You can typically deduct:

• Rent or lease costs for business premises
• Utilities (electricity, water, internet, phone)
• Office supplies (stationery, printing costs, software subscriptions)
• Business insurance (public liability, professional indemnity, contents insurance)

If you work from home, you may be able to claim a portion of these expenses — see the home office deductions section below.

2. Vehicle and travel expenses

If you use a vehicle for business purposes, you can claim:

• Fuel and maintenance costs
• Registration and insurance
• Depreciation (if you own the vehicle)
• Lease payments (if you lease a business vehicle)

If you use your vehicle for both business and personal use, you can only deduct the business portion. The logbook method is a common way to track mileage for business trips.

For business-related travel, you may also be able to deduct:

• Domestic and international flights
• Accommodation costs
• Rental car hire
• Business-related meals (note: some meals may only be 50% deductible under NZ tax rules)

Entertainment expenses have specific rules — check IRD’s guidelines to see what qualifies.

3. Equipment, tools, and assets

Laptops, phones, office furniture, and machinery used for business can be claimed as deductions. However, how you claim them depends on the cost of the asset:

Under $1,000: You can claim the full amount immediately as an expense.

Over $1,000: You must depreciate the cost over time.

Check IRD’s depreciation rates to ensure you’re claiming these deductions correctly.

4. Employee wages and KiwiSaver contributions

If you have employees, you can deduct:

• Salaries and wages paid to staff
• Compulsory KiwiSaver employer contributions (minimum 3%)
• ACC levies paid on behalf of employees
• Payments to contractors may also be deductible, but ensure they are genuinely independent contractors under IRD rules.

5. Marketing and advertising costs

To help grow your business, you can deduct expenses related to:

• Website design, hosting, and maintenance
• Digital and social media advertising
• Print advertising (newspapers, magazines, billboards)
• Promotional materials (business cards, signage, flyers)
• If you invest heavily in marketing, track expenses carefully to maximise deductions.

6. Professional services and memberships

Hiring professionals to help manage your business? Their fees are typically deductible, including:

• Accountants and bookkeepers (for tax preparation and business advice)
• Legal fees (for contracts, business setup, or disputes)
• Industry memberships and trade associations

Ongoing business coaching or training may also be deductible — see the training section below.

7. Home office expenses

If you run your business from home, you may be able to claim a portion of household expenses related to your workspace, including:

• Power and gas
• Internet and phone
• Mortgage interest or rent
• Office furniture and equipment

How to calculate home office deductions:

Actual cost method: Claim a percentage of total household expenses based on the size of your home office.

Square metre method: Use IRD’s fixed rate per square metre of business space.

Remember to keep records of your home office usage to support your claim.

8. Interest and banking fees

You can deduct interest on business loans, overdrafts, and credit cards, as well as fees related to:

• Business bank accounts
• Loan establishment fees
• Merchant service fees (e.g., credit card processing costs)

Make sure any loan is strictly for business purposes — personal loans used for business may not be fully deductible.

9. Training and education

Upskilling yourself or your employees? Work-related training expenses can be deducted, including:

• Online courses and certifications
• Business coaching and mentorship programs
• Industry conferences and workshops

General self-improvement courses (e.g., leadership coaching) may not be deductible — training must directly relate to generating income in your business.

10. Bad debts

If a client fails to pay an invoice, you may be able to write off the unpaid amount as a tax deduction, but only if:

• You have made reasonable efforts to recover the debt
• The debt is officially written off before 31 March (end of the tax year)

Keep records of unpaid invoices and collection attempts to support your bad debt claim.

How to maximise your tax deductions

Understanding small business tax write-offs NZ can help you claim every deduction you’re entitled to.

1. Plan your expenses before the tax year ends

If you’re considering buying new equipment, tools, or software, making the purchase before 31 March means you can claim the deduction in the current tax year, reducing your taxable income sooner. Similarly, if you have upcoming business expenses, prepaying them (e.g., rent or insurance) could help bring down this year’s tax bill.

2. Use tax losses to your advantage

If your business made a loss this year, you may be able to carry that loss forward to offset future profits, reducing your tax bill when your business income increases. This is especially useful for new businesses still in the early stages of growth.

3. Review past returns for missed claims

The IRD allows you to amend previous tax returns, so if you realize you forgot to claim a deduction in a past year, you may be able to adjust your return and get money back. This applies to expenses like home office deductions, professional fees, and business loan interest.

4. Talk to a tax professional if you’re unsure

Even if you manage your own taxes, an annual check-in with an accountant can help ensure you’re not missing key deductions or making errors that could lead to penalties. The best part? Accounting fees are tax-deductible!