Recently Inland Revenue have started a Real Estate Sector Campaign to investigate the level of expenses agents are claiming against their income.
Expenses that are directly related to your business include real estate licenses, advertising and marketing, ACC, wages and accountancy. Other expenditure relating to training conferences and seminars relating to the industry are also deductible.
One of the expenses in the spotlight are business vehicle expense claims and how these are calculated. An issue arises where the vehicle is used for both business and private use. In this case it is important to assess whether a logbook has been kept to determine the percentage of business use. A logbook is required to be kept for 90 days and should be renewed every three years.
Business clothing can be claimed which is ‘distinctive work clothing’. The clothing typically has a business logo or advertising embroidered on it. Normal work clothing without a logo are not a deductible expense, nor are other personal grooming products.
Client gifts are able to be claimed but agents need to be careful where this includes personal or entertainment expenses. It is best to keep a record of who the gifts and entertainment are purchased for to prove a link between the expense and income earned.
A commonsense approach will usually see the correct deduction claimed.