Quick answer
New Zealand splits the phone question by who you are. Employees cannot deduct phone costs at all; instead, employers reimburse tax-free under Determination EE004: up to 75% of the bill where the phone is principally for work, or a no-questions $7 a week safe harbour. The self-employed deduct the business share of the bill, and GST-registered businesses claim the 15% GST on that share.
Is a phone tax deductible in New Zealand?
For a business or sole trader, yes at the business proportion. For an employee, no: NZ’s employment-income limitation means work expenses cannot be deducted against salary, which makes the employer-reimbursement rules the entire game. Inland Revenue’s Determination EE004 (applying from 1 April 2023) sets out what an employer can pay an employee tax-free for personal telecommunications tools and plans used in the job, and it is the reference point every NZ bookkeeper works from.
EE004 offers two mechanisms. The safe harbour needs no evidence: up to $7 a week per employee for telecommunications usage (sitting alongside a $20 a week home-working amount, $27 in total) treated as exempt income. The reimbursement option scales with reality: where the employee’s tools and usage plan are used principally for business, the employer can reimburse up to 75% of the actual bill tax-free, supported by usage evidence or a signed declaration that business use predominates. Exclusive business use supports full reimbursement.
The self-employed simply apportion: the business share of the monthly plan and the handset is deductible, with the handset depreciated where its cost is material rather than expensed.
How much can you claim?
Worked example, employer side: a practice’s senior bookkeeper uses her own phone principally for client work. Her plan is $80 a month. Under EE004’s reimbursement option the firm pays her $60 a month (75%) tax-free, and deducts it as an ordinary business cost. A junior who occasionally takes work calls gets the $7 a week safe harbour instead, $364 a year, no records required.
Worked example, sole trader: a landscaper’s $75 monthly plan is roughly 60% business by call and data pattern. The annual deduction is $75 x 12 x 60%, which is $540, plus 60% of the handset.
| Situation | Treatment |
|---|---|
| Employee’s own phone | No employee deduction; employer reimburses under EE004 |
| EE004 safe harbour | $7/week telecom, exempt, no evidence |
| EE004 principally business | Up to 75% of the bill, exempt |
| Sole trader | Business share of plan and handset |
| Business-owned phone for work | Deductible; business-tools treatment |
GST on phone costs
A GST-registered business claims the 15% input tax on the business share of costs it incurs directly: its own plans, business-owned handsets, and accessories, from tax invoices. Reimbursements paid to employees under EE004 are employment payments, not supplier invoices, so they do not carry a GST claim. The apportionment discipline mirrors income tax: the share claimed on the GST return should match the business-use story told everywhere else.
Record-keeping requirements
Seven years, as with all NZ business records. Employers keep the EE004 basis for each employee: the safe harbour election, or the usage evidence or signed declaration behind a 75% reimbursement. Sole traders keep the bills and the workings behind the business percentage. The declaration route makes EE004 genuinely light-touch, but the declaration itself has to exist and be kept.
How to claim, step by step
- Identify the party: employee (reimbursement only), sole trader (apportion), or company (own costs plus EE004 for staff).
- Employers: choose per employee between the $7 a week safe harbour and the 75% principally-business reimbursement, and collect the declaration for the latter.
- Run the reimbursements through payroll as exempt income and deduct them as business costs.
- Sole traders: set a defensible business percentage from usage and apply it to the year’s bills and handset.
- Claim the 15% GST on the business share of directly incurred costs, from tax invoices.
- Keep the declarations, bills, and workings for seven years.
Common mistakes
- An employee trying to deduct phone costs on an IR3, which NZ does not allow.
- Reimbursing 100% of a mixed-use plan tax-free instead of the EE004 75% ceiling.
- Paying the safe harbour and a percentage reimbursement for the same employee at once.
- Claiming GST on employee reimbursements rather than on the business’s own invoices.
- No signed declaration or usage evidence behind a principally-business reimbursement.
Software that helps
- Hubdoc fetches the monthly provider bills that evidence both the deduction and the GST claim.
- ExpenseFlow captures phone bills and reimbursement claims, routes them through approval before anything posts, applies the right GST treatment to the business share, and syncs to Xero or QuickBooks with the bill attached.
- Xero payroll handles the exempt-income treatment of EE004 payments cleanly.
FAQ
See the answered questions above for the employee limitation, EE004 amounts, self-employed apportionment, GST, and company phones.
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