If you use an area of your home for your business, such as your home office, garage or a workshop, you can claim a portion of the household expenses and reduce your tax bill. Don’t worry, claiming NZ home office expenses can be simple when you know how.
All self-employed people, including freelancers, contractors and sole traders, can claim expenses against their income. If you use your home for business, whether you’re self-employed, in partnership or own a company, you can claim a portion of household expenses.
Which home office expenses can you claim?
- Rent
- Power & Gas
- Internet & Phone – 50%
- Rates & Water
- House Insurance
- Mortgage Interest
How much of an expense can you claim?
How much you can claim of each expense depends on the portion of the home you use for work. If part of your home (such as office, garage or workshop) is completely set aside for business use you just need to consider the floor area.
For example, if your home is 100 square metres and your working space is 10 square metres — 10% of the total area — you can claim 10% of expenses.
When calculating the space used for business in your home, the claimable space:
should not include your toilet/bathroom, kitchen, garage etc.
can include storage areas – if you are storing items/documents/equipment/tools used for your business.
Square metre rate option
Instead of working out how much of your household expenses will be allocated to your business, you can use the square metre rate option if the business area is set aside and used mainly for business purposes. This option uses a rate that IRD set each year based on the average cost of utilities per square metre of housing for the average New Zealand household.
This rate does not include premises costs of mortgage interest, rates or rent. You can also claim a portion of these based on the percentage of floor area used for the business.