As a contractor or sole trader, it’s easy to assume that anything you buy while “on the job” is fair game for a GST claim, especially those regular supermarket runs for fuel, food, or supplies. But the truth is, Inland Revenue draws a firm line between personal and business expenses, and not knowing where that line sits can cost you.
In this guide, we unpack what you can legitimately claim, what will get flagged, and how to stay on the right side of the IRD, with practical GST tips tailored specifically for those running their own business.
What You Can Claim Back
1. Business-Related Supplies
Purchases that are directly related to your taxable activity, such as cleaning products for a home-based studio, coffee for client meetings, or packaging materials, are generally claimable for GST.
The traditional “tax invoice” is no longer mandatory. Instead, you must hold taxable supply information, which includes:
- The supplier’s name
- The date of the supply
- A description of the goods or services
- The amount of GST charged
Without these details, your claim may be denied. You can find more information about these requirements at the IRD’s official website.
2. Fuel & Transport Costs
If you use your vehicle for business purposes, fuel and related transport expenses are claimable. However, if your vehicle use is mixed (both business and personal), you must apportion the costs appropriately.
The IRD allows you to use a 90-day logbook method, where you track vehicle use continuously for three months. This percentage of business use can then be applied to vehicle expenses, including fuel, for up to three years, assuming usage doesn’t vary by more than 20%.
3. Office Pantry or Hospitality Supplies
Tea, coffee, biscuits, and other items provided to staff or clients on your business premises are generally 100% deductible for both income tax and GST.
However, if the same items are provided as part of entertainment, such as at a restaurant or during a client lunch, the deductibility drops to 50%. This reflects the IRD’s view that these expenses have a personal enjoyment component.
What You Can’t Claim Back
1. Personal Groceries
Even if purchased alongside business items, personal groceries are not claimable. These should be clearly separated in your records. Combining business and personal items on the same receipt can complicate record-keeping and may result in non-compliance.
2. Entertainment Expenses
Meals, drinks, and other entertainment-related expenses provided to clients or staff off-site are only 50% deductible for both GST and income tax. This rule exists to reflect the private benefit often associated with such expenses.
3. No Valid Taxable Supply Information
You cannot claim GST on purchases if you do not have proper taxable supply documentation. For purchases over $200, you must retain supply details such as:
- Supplier’s name and GST number
- Date of the supply
- Description of goods/services
- GST amount
Refunds and Returns
If you return goods that you previously claimed GST on, you must adjust your GST return accordingly. Failing to do so can lead to discrepancies in your tax records and may attract penalties if reviewed by the IRD. This applies whether you receive a full refund or a credit note.
Final Tip: Keep Business and Personal Purchases Separate
Where possible, make separate transactions for business and personal items. Request split receipts or use different payment methods to maintain clarity in your records. This small effort can significantly reduce your admin workload at tax time and provide cleaner documentation in case of an IRD review or audit.
The content in this blog is intended to provide general insights and should not be regarded as professional advice. Each business situation is unique, and we recommend consulting with a professional for specific guidance. At Black Arrow Business Studio, we specialise in accounting and consulting services designed to support your business’s growth and success. Feel free to contact us for expert advice and customised solutions.
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