The general rule: was it used to earn income?
Under IRD's general expense rules, you can claim a cost if it was genuinely incurred in earning your business income, and it is not private or domestic in nature. A set of tools bought for a job clears that test easily. A family grocery shop does not, even if you occasionally eat while working.
Plenty of real costs sit in between - a vehicle used for both work and weekends, a home office in a house you also live in, a phone you use for both clients and mates. For those, you claim the business-use portion only, worked out on a reasonable, defensible basis - not the whole bill.
What Sole Traders Typically Claim
Materials & tools
- Materials bought for a specific job
- Tools and small equipment under $1,000 (claim in full, the year you buy it)
- Tools and equipment over $1,000 (depreciated over their useful life, not claimed all at once)
- Safety gear and protective equipment
Vehicle costs
- Fuel, WOF/rego, insurance, repairs, and depreciation - business-use portion only
- Track business-use % with a logbook (a 90-day sample is the common method), or use IRD's published kilometre rate for a simpler mileage-based claim
- Personal trips (the school run, groceries) are not claimable, even in a work vehicle
Vehicle claims are one of the most-checked areas by IRD - keep whichever method's records you choose.
Home office
- A reasonable apportionment of rent/mortgage interest, power, and contents insurance if you work from home
- The usual method is business floor area as a percentage of total house floor area
- IRD also publishes a square-metre rate you can use instead of tracking actual home running costs - check IRD's current published rate
Phone & internet
- The business-use percentage of your phone and internet bills
- A simple, reasonable estimate is fine - you do not need to itemise every call
Subcontractors
- Payments to subcontractors for work on a job are a direct business cost
- If you deduct withholding tax from a subcontractor payment, that is a separate PAYE-style obligation - not something the subcontractor invoice cost itself changes
Insurance & levies
- Business insurance - public liability, tools, vehicle, professional indemnity
- ACC levies you pay as a self-employed person
- Income protection or life insurance premiums are a different case - deductibility depends on the policy, so check with your accountant
Software & subscriptions
- Invoicing and accounting software (Invio included)
- Cloud storage, design tools, and other software used to run the business
- Website hosting and domain costs
Professional & admin costs
- Accountant and bookkeeper fees
- Bank fees on a business account
- Advertising and marketing spend
- Professional memberships and training directly related to your trade
How GST Registration Changes What You Claim
Not GST-registered
Claim the full, GST-inclusive price as your expense. You have no mechanism to reclaim the GST component separately, so the whole amount you paid is genuinely your business cost.
GST-registered
Claim the GST-exclusive price as your expense, then claim the GST portion back separately on your GST return. Deducting the GST-inclusive amount as an expense as well would double-count it.
Not sure whether you need to register? Read our GST registration guide for the $60,000 threshold and the exact myIR steps, or use the GST calculator to split any figure into its GST and ex-GST components.
What you cannot claim
- Purely private or domestic spending - groceries, personal clothing, family trips - even if paid from a business account.
- The personal-use share of anything with mixed use - your vehicle, phone, or home office - beyond the business-use portion you can justify.
- Fines and penalties (parking tickets, traffic fines) incurred while on the job.
- Client entertainment beyond the 50% that IRD's entertainment rules allow.
Frequently Asked Questions
What can I claim as a sole trader in NZ?
Can I claim my vehicle if I use it for both work and personal driving?
Do I need a receipt for every expense?
Can I claim my home office as a sole trader?
If I am not GST-registered, do I claim the GST-inclusive or GST-exclusive amount?
Are entertainment expenses deductible?
Does Invio track my expenses for me?
This is general information, not tax advice. Whether a specific cost is deductible depends on your circumstances - check ird.govt.nz or ask your accountant before you claim anything you are unsure about.