Quick answer
Accounting, consulting, and most legal fees are deductible in New Zealand when they relate to running the business. The standout rule is section DB 62: if your total legal fees for the year are $10,000 or less, they are all deductible even if some are capital. Above $10,000 the normal capital test applies to every invoice. Employees cannot deduct professional fees against wages. GST on New Zealand advisers is claimable as input tax.
Are professional fees tax deductible in New Zealand?
Yes, under the general permission, subject to the capital limitation. The deductibility of accounting and legal fees depends on whether the underlying transaction is revenue or capital in nature. Fees for dealing with creditors, chasing debtors, drafting trading terms, handling employment issues, or preparing accounts and returns are revenue and deductible. Fees for acquiring a capital asset, drafting changes to a company constitution, or negotiating the purchase of a business are capital and not deductible, though they form part of the asset’s cost.
Legal fees have a safe harbour that no other professional cost enjoys. Section DB 62, introduced by the Taxation (Business Tax Measures) Act 2009, overrides the capital limitation for legal fees where the total for the income year is $10,000 or less. The policy intent was to let small businesses claim business-related legal expenditure up to $10,000 a year without having to distinguish between revenue and capital. Legal expenses for this purpose means fees for legal services from a lawyer holding a New Zealand Law Society practising certificate or an Australian equivalent, so a conveyancer’s or consultant’s bill does not count towards the concession and is tested in the ordinary way.
Employees are in a different position from every other country on this site. New Zealand’s employment limitation denies deductions for expenses incurred in earning salary or wages, so a nurse’s annual practising certificate, a teacher’s registration, or an engineer’s chartered fees cannot be claimed in a personal return. Employer reimbursement of a work-related cost is tax-free to the employee, which makes it the sensible route. Membership subscriptions sit on the claim subscriptions in New Zealand page.
How much can you claim?
Revenue fees in full, legal fees in full up to the $10,000 ceiling, and capital fees added to the asset. Worked example: a Hamilton landscaping company pays $3,200 to its accountant for annual accounts and the tax return, $1,800 to a lawyer for an employment dispute, and $6,500 to the same lawyer for buying a neighbouring yard. Total legal fees are $8,300, under $10,000, so under section DB 62 the full $8,300 is deductible despite the land purchase being capital. With the accounting fee, the company deducts $11,500, saving $3,220 at the 28% company rate. Had the yard purchase cost $9,000 in legal fees, total legal fees would be $10,800, the concession would not apply, and the $9,000 would be capitalised.
| Fee | Treatment |
|---|---|
| Accounts, GST returns, income tax return | Deductible |
| Legal fees, total $10,000 or less in the year | Deductible in full under DB 62 |
| Legal fees over $10,000 in total, revenue work | Deductible |
| Legal fees over $10,000 in total, capital work | Added to asset cost |
| Due diligence on buying a business | Capital |
| Fines, penalties, and use-of-money interest on tax | Not deductible |
| Employee practising certificates and registrations | Not deductible by the employee |
GST on professional fees
New Zealand professional services carry 15% GST, which a registered business claims as input tax at the business-use percentage. Taxable supply information must meet the threshold for the invoice size: under $200 a basic receipt is enough, $200 to $1,000 requires the supplier’s GST number and the GST amount, and over $1,000 also requires the buyer’s name and address. Overseas advisers are remote services: give them your GST number and they should not charge GST, and the reverse charge applies only where your taxable use of the service is below 95%. The New Zealand GST guide covers the thresholds in detail.
Record-keeping requirements
Keep engagement letters and itemised invoices. For legal fees, a running total through the year is essential because the DB 62 concession is all-or-nothing at $10,000. Ask lawyers to split invoices between matters so the capital element can be identified if the total tips over. Business records must be kept for seven years. The New Zealand record-keeping guide covers electronic storage.
How to claim, step by step
- Total the year’s legal fees from practising lawyers; if $10,000 or less, deduct them all.
- If over $10,000, classify each legal invoice as revenue or capital and capitalise the capital ones.
- Deduct accounting, consulting, and advisory fees that relate to operations or to the business’s own tax compliance.
- Add capital professional fees to the cost of the asset in the fixed asset register.
- Claim input tax on the GST return with taxable supply information that meets the threshold.
- Employees: arrange employer reimbursement rather than claiming personally.
Common mistakes
- Treating DB 62 as a $10,000 deduction and claiming the first $10,000 of a larger legal bill.
- Counting conveyancer or consultant fees towards the legal fee concession.
- Employees claiming registration fees that the employment limitation blocks.
- Capitalising legal fees on a small lease or supply contract that are revenue in nature.
- Charging GST to the business on an overseas adviser’s invoice instead of giving the supplier the GST number.
Software that helps
- Dext captures adviser invoices and keeps the running legal fee total visible by supplier.
- ExpenseFlow reads legal and accounting invoices with frontier vision AI, explains under each line whether a fee is a running cost or belongs to an asset, lowers its confidence for review when the invoice names a transaction without saying what was acquired, flags overseas adviser bills that need reverse-charge treatment, and syncs the approved bill to Xero with the document attached, or to QuickBooks Online as a coded bill.
- Xero reports spend by contact, which is the quickest way to see where the legal fee total sits before year end.
FAQ
See the answered questions above for the $10,000 rule, exceeding it, accounting fees, employees, and GST.
From ExpenseFlow
GST coding on autopilot
ExpenseFlow reads every receipt, assigns the right GST treatment and account code, and syncs to Xero or QuickBooks Online once you approve.