Taxing questions for locums (Pharmacy Today – April 2011)


I am a locum pharmacist in several pharmacies. Sometimes I work in more than one pharmacy in one day. Can I claim the means that I pick up in between jobs as an expense in my income tax return? What about the cost of travel between the pharmacies? I also sometimes work long shifts of 12 hours or longer and have heard, on those occasions, I am entitled to an overtime allowance, which can be paid tax free. Is this true?


Working as a locum and being paid as an independent contractor has some real tax advantages compared with working as an employee. Employees are not able to claim any expenses incurred in their employment, other than the cost of tax return preparation. An independent contractor can claim expenses to the extent they are incurred in deriving taxable income, eg, work-related travel, or incurred in carrying on business, for example, accounting fees.

The difference between an independent contractor and an employee is a contentious area of law. Last year the Government, in response to complaints from the producers of The Hobbit, changed the law to clarify the situation for film production workers. Unfortunately, the opportunity was not taken to spell out the rules across all industries. We can only hope this occurs in due course!

For the purposes of this discussion, I will assume a locum does not have a contract describing them as an employee but is an independent contractor. More information is available at

Travel between two places of work (but not from home to work), or incurred while working is tax deductible.

There are three options for calculating the cost of the travel, actual expenditure, log book or a mileage reimbursement rate. For most situations, Markhams recommends a reimbursement rate is usually is used, as this is simple, easy to calculate, and the rate is high enough to cover all expenses (including depreciation) for most cars. The IRD publishes rates and the current rate is 70c per km. In most situations, driving from home to work is not considered to be tax deductible.

The tax rules on food and drink are covered by the entertainment rules. But first, the normal rules (mentioned above) for deducting expenses must be considered. It could be argued meals eaten while travelling between places of work are expenses incurred in deriving taxable income. However, expenses that are considered to be private or domestic in nature are not able to be claimed. This means most meals costs would not be tax deductible.

There is some case law to support that any excess cost (over the usual cost of having a meal at home) incurred due to the late and irregular hours worked is tax deductible.

However, the benefit of claiming this excess is likely to be small and outweighed by the inconvenience to you of keeping receipts and calculating the difference between cost of your takeaway food and the “normal” cost of a meal.

You can claim the cost of meals in some situations though, First, entertaining potential customers (pharmacy owners) or other business related people.

When paying for a meal or drinks for business purposes, the cost of the meal is 50% deductible for income tax and GST to you. Next, meal expenses while travelling.

If you travel on a one-off or irregular business trip, for example a Dunedin pharmacist working for a couple of days in a pharmacy in Invercargill, the cost of meals or accommodation is fully deductible for income tax and GST. This applies for genuine travelling only – a Dunedin pharmacist working in Mosgiel (like an Auckland pharmacist working for the day in Pukekohe) would not be considered to be travelling.

There are provisions allowing a deduction for the cost of an overtime meal allowance. However, this deduction is available for employers paying an allowance to employees, unfortunately not to independent contractors such as locum pharmacists.

In conclusion, in most situations – and this article has only covered the usual types of situations – the cost of takeaway food purchased between work locations is no deductible. If this seems unfair to you, spare a thought for the average New Zealand employee, who is not able to claim a deduction for any of the expenses they incur in performing their work.

Published by Andrew Millington, Markhams Auckland in Pharmacy Today, April 2011

Serious about your success?