Generally, no deduction is allowed for expenditure incurred in deriving employment income. It is therefore necessary that employers assess the correct tax treatment of allowances and expense reimbursements at payroll (PAYE) submission time.
Deductions are available for expenditure incurred in deriving assessable or excluded income (other than employment income) incurred in the course of carrying on a business. Subject to the entertainment expenditure provisions, certain entertainment expenditure is only 50% deductible.
The New Zealand government has enacted legislation that denies interest deductions incurred in relation to residential investment properties. These rules are intended to address housing affordability and promote greater owner occupation of housing. As such, properties that are not suitable for owner occupation are excluded from the rules (e.g. commercial accommodation, such as hotels, retirement villages, student accommodation, or business premises). The new rules apply from 1 October 2021, with interest deductions phased out over time until they are disallowed completely. The rules include exemptions for interest incurred in relation to property development and 'new build' land, to promote the supply of new housing.
No deduction is permitted for medical, superannuation, or insurance contributions. Certain insurance premiums may be allowed as a deduction under the general permission (i.e. loss of earnings).
Taxpayers are eligible for a tax credit for charitable donations/contributions made during the tax year. See the Other tax credits and incentives section for more information.