Is business travel IRD tax deductible?

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kingdragonfly

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#262179 9-Jan-2020 08:13

I've gotten a 3 month contract, work at home, at about $30,000 total pay.

Then I'll be made a permanent offer or be terminated.

I drove my car for training, less than $1,000 all told.

Is there anyway the travel expenses are IRD tax deductible?

I was thinking of just using "sole trader", but I was wondering if being a GST registered company would offer much financial difference.

Cheers

Andib

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#2387743 9-Jan-2020 08:23

I'm not an accountant but if you're only doing a one off 3 month contract for 30k, I wouldn't bother registering for GST.
You can still claim valid business expenses against your profit as a non GST registered sole trader, you just can't claim back the GST on them.

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tchart

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#2387822 9-Jan-2020 09:40

+1 if its short term I wouldnt bother.

Im a sole trader and registered for GST. The overhead if you register is a PITA and is ongoing. At the moment Im consulting to an overseas company so my invoices are zero rated for GST but I still have to file GST returns.

If you dont register you can just deduct the entire amount (including the GST) as an expense.

So to answer your question yes travel is a deductible expense if you are not being reimbursed or charging the customer for it.

BlinkyBill

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#2388958 9-Jan-2020 11:44

In order to claim, you will have had to keep a logbook (if used your own vehicle) or receipts, and some kind of invoice or booking form for the training itself, as a cross-reference.

Agree with the above, not worth registering as GST collector for a one-off $30k contract, and the GST component has no fiscal impact on the business expense claim anyway.

frankv

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#2389055 9-Jan-2020 13:55

Driving to/from home to place of work is not tax-deductible. Driving from one place of work to another is.

I guess if you're working from home, then it is all deductible. But you better be able to prove to IRD that you do indeed work from home.

BlinkyBill

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#2389130 9-Jan-2020 16:32

frankv:

Driving to/from home to place of work is not tax-deductible. Driving from one place of work to another is.

I guess if you're working from home, then it is all deductible. But you better be able to prove to IRD that you do indeed work from home.

The OP is a contractor, I’m guessing in the IT industry. If he works from home, on assignment, then occasional trips would be a business expense. If he travels most days to a customer’s office, for three months, then that would not be a deductible expense. Here’s why:

IRD apples a ‘what is reasonable’ test. It is a reasonable business expense if travel is a standard business practice, for example a plumber travels to multiple different locations to conduct business. An IT contractor working for 12 months at MSD (God forbid) travels to the same MSD office every day, to and from home. That is not travel as a standard business process, and is therefore not deductible.

If the IT contractor travelled to a different MSD office at his expense 4 times in the 12 months, to conduct business, then that would be deductible.

Deductible expenses need to be logged and evidenced.

So - it’s not whether you work from home or not, it’s whether the travel is part of the process of conducting business.

kingdragonfly

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#2389457 10-Jan-2020 09:21

It's a one-off trip, but spot on for the rest. Cheers