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Thread ID: 98297	2009-03-19 05:29:00	Tax deductible expenses - is it really like this?	rixth (9629)	PC World Chat

Post ID	Timestamp	Content	User
757742	2009-03-19 05:29:00	I do contract development, and am looking at buying a laptop to use in my business. I am doing the math, but think I've got it wrong. Have I got this right? Here's the scenario. Let's say I stand to make $47,000 this tax year. This puts me in the 33.4% tax bracket (including ACC levy). I would pay $10,162 in tax overall. Now, for instance, I buy a $3400 laptop (exc. gst). That would make my taxable income $43,600. Tax on that would be $8,988 overall. The difference is $1174. Does that mean, that by buying that laptop, I will pay $1174 LESS tax this year, or have I gone wrong somewhere?	rixth (9629)
757743	2009-03-19 05:39:00	Depends. You "make" $47,000 ? If you were paying tax on taxable income - arrived at by a profit & Loss system, and the laptop is listed as a business expense, then I guess you're right. In a way. Doesn't usually work out exactly like that....... How do you "make" the $47000? Someone pays it to you? Or its taxable profit?	pctek (84)
757744	2009-03-19 05:42:00	How do you "make" the $47000? Someone pays it to you? Or its taxable profit? $47,000 charged to clients for my services. For arguments sake, lets say my business has no other expenses (which is close to true).	rixth (9629)
757745	2009-03-19 06:40:00	At a wild guess, that might mean, taking the GST of the laptop and then subtract that off your gross annual income, then calculate tax again.	Nomad (952)
757746	2009-03-19 06:42:00	Why not get hold of a accountant and find out? Or contact the IRD for example. Or try the business mentors. I am not going to give you advice. Free advice may be worth exactly what you paid.	Sweep (90)
757747	2009-03-19 06:53:00	Free advice may be worth exactly what you paid. ^^ I like it! Whenver I try to call the IRD (been trying every 15 minutes or so), I just get the message 'We can't connect you because the call center is overloaded'. taking the GST of the laptop and then subtract that off your gross annual income, then calculate tax again. Yes, that is the information I got from another person who runs a small business. That's what I am doing in the scenario above, too. So it looks like, on the face of it, my math is correct but will speak to a business advisor.	rixth (9629)
757748	2009-03-19 07:03:00	I think you'll find when you talk to an accountant that you won't get the full deduction of the cost of the lappie, but only around 30% (GST is a separate issue). But then it forms part of your business assets, which you can claim depreciation for every year. And you can claim depreciation on your business-related (not your copy of Crysis!) software also.	johcar (6283)
757749	2009-03-19 07:27:00	Three things to be aware of: 1) If you are a contractor, sending invoices to your client, you will need to be registered for GST since your turnover is above the threshold. 2) Are you operating as a sole trader, or have you formed a company? From a tax perspective you may want to investigate forming a company. 3) As Johcar has already mentioned, buying a laptop is a capital expense, not an operating expense. That means you can't write off the whole lot in one go, rather, it becomes an asset that you can write off depreciation on.	somebody (208)
757750	2009-03-19 07:45:00	I think the GST threshhold was raised to 60K recently - but it's worth registering anyway....	johcar (6283)
757751	2009-03-19 07:46:00	I think you'll find when you talk to an accountant that you won't get the full deduction of the cost of the lappie, but only around 30% (GST is a separate issue). But then it forms part of your business assets, which you can claim depreciation for every year. And you can claim depreciation on your business-related (not your copy of Crysis!) software also. Aren't the revenoo'ers likely to consider that your work copy of Vista just simply can't get any worse? :badpc:	R2x1 (4628)
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