Forum Archive Index - July 2000

["Oliver Shapleski" <oliver.shapleski@vuw.ac.nz>]

Hi all,

Again, I don't claim authority on this subject BUT there are a few things in
Julie's email which I doubt.

> (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).

Dubious.  There is case law to suggest that you will be hard pressed to
claim any start-up expenses for being a trader.  You can claim expenses if,
for example, you plant trees and grow them - making a direct investment in
the income producing asset - even though you do not get an income stream
until the trees are cut down.  Buying equipment to begin trading would, I am
fairly sure, be a capital expense, hence no deduction.  Once you are a
declared trader you will be able to claim on the cost of information, but I
do not believe you will be able to before you are a declared trader.

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

I strongly disagree with this.  A new CPU is a new computer, hence not a
repair.  The Privy Council finally decided Auckland Gas v CIR a couple of
weeks ago which strongly answers this question in the Commissioners favour.

> 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.

No, you can more than likely claim the whole expense.  A simple "but for"
question.

If in doubt, check with your lawyer.

Oliver


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