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If you are a business owner and use part of your home for work, you can make a business claim for home office expenses.  There must be a connection between the use of your home and the business income being generated.

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Currently there are two ways to calculate the amount you can claim being:

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1.    Proportion of your total home expenses or

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2.    Square Metre Rate Option

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1. Proportion of your total home expenses method:

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You will need to determine the total yearly costs of your GST inclusive expenses for rates (council and water), insurance (both house & contents), electricity, security, cleaning and repairs.  You then claim a portion of these based on the percentage of your office as a portion of your total home area.  If you are GST registered, you claim the GST content and the exclusive costs form part of the home office expense. To this you add the portion of your mortgage interest or rent paid (these costs have no GST content).

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2. Square Metre Rate Option:

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IRD introduced this method from the 2017-2018 income year.  This option uses a flat rate for working out your home office expenses rather than your actual expenses.  This eliminates the requirement to keep records for your individual home expenses.

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The IRD updates the rate each year. The current rate for the 2023 – 2024 income year is $53.10 per square metre.  This rate does not include premises costs of mortgage interest or rates.  You still need to claim these costs using the percentage of floor area you use for your business.  

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Example – your work area is 15 sq metres of a total home area of 150 sq metres. (10% of the total).  Your rates are $4,000 for the year and your mortgage interest paid for the year was $12,000.  The calculation would then be:

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   15 sq metres at $53.10                               796.50

   10% of rates                                                  400.00

   10% of mortgage interest                      1,200.00

   TOTAL HOME OFFICE CLAIM OF       $2,396.50

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You can claim 100% of your office consumables such as paper, pens & printer cartridges.  You can also claim 100% of any office furniture purchased under $1,000 an item.  Items greater than $1,000 will need to be capitalized and depreciated at the appropriate rate.
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Internet and phone costs when you work from home are generally claimed at 50%.  If you have a phone that is only used for business, you can claim 100% of the costs. Business-related tolls are also 100% claimable.
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If you have a separate room/workshop on your premises, the expenses directly related to this room will be claimed 100%.  This excludes the costs of building or supplying this room as the asset will generally form part of your property that could be sold in the future as part of your home.

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We are here to help if you have any questions.

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