Forum Archive Index - July 2000

["Julie Daniell" <juggla_@hotmail.com>]

 Roger wrote:
> 1. As I have not done any trading, can I still claim expenses eg
> newspapers, interest, subscriptions etc.?

(I'm not an accountant, but as I understand it...)
Costs of establishing a business (including as a trader) are largely
deductible provided that the business is expected to make a profit
eventually (within 2-3 years). For example, the related expenses incurred in
the six-month run-up to your company launch, a vocational training course or
a course required to raise your skill level before (or after) becoming
self-employed. It is not required that you return an income before expensing
anything. (Note vocational training generally excludes university but
includes polytech. Other training must improve on a skill base you already
have, as I understand it.)

> 3. Do I have to claim depreciation on my computer and if yes, do I need
> some kind of formal valuation?

In some cases, claiming depreciation is a  two-way street. If you manage to
sell the asset for more than it's book value you have to pay tax on the
increased value - effectively paying back the part of the depreciation
claimed that you never really lost in the first place. (Grossly simplified.)

While this is relevant for investment houses - you may well choose not to
claim a depreciation that you have to refund in the future - it is less
relevant for computers. Inevitably they lose value and the Government is
kind enough to return the tax on that value. Why argue?

Bear in mind that improvements and repairs to your computer  - new cpu etc -
should also be included and either depreciated or expensed.

If the computer is used for business purposes for 60% of the time, and
family use the rest of the time then you are only entitled to claim 60% of
the depreciation.


You also need to look out for changing tax brackets. Bear in mind that you
don't actually claim the depreciation - you just get tax relief on it at
your top dollar rate. In  the first year of your business you may only be
paying 20%ish on your top dollar. In the year that you sell the asset, the
difference between book value and sale price could be txed (or relieved) at
your successful business' top dollar rate of 39%.

(You might argue that having the house depreciation in your pocket for a few
years enables you to invest it for a gain in the meantime - if all goes
according to plan.)


Regards

Julie


----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.