If you use part of your home for your business, e.g. your study or garage, you can claim a portion of the household expenses. The portion you can claim relates to the area of your home you use for business.
Expenses you can claim include:
- house and contents insurance
- mortgage interest if you own the home, or rent if you rent the home
- security alarm
- maintenance (refer below)
- telephone and broadband (refer below)
You must keep invoices for your expenses.
If you have set aside part of your home for 100% business use, you just need to consider the floor area. For example, if your home is 100 square metres and you use 10 square metres for work, you can claim 10% of most expenses.
If you don’t have a separate area set aside, you need to adjust for the amount of time you use that part of your home for work.
If you’re GST registered, you can claim the GST content of home office expenses. You can claim in each GST return as they’re paid, or at the end of your tax year. Mortgage interest and rent don’t include GST.
You can claim a portion of maintenance that affects the whole house e.g. exterior painting (10% in the above example).
If the maintenance is in the business area, you can claim 100%.
If it’s in a non-business area e.g. bedroom, then no claim.
If you have one landline, you can claim 50% of the rental and 100% of business toll calls.
If you have a separate business line, you can claim 100%. You can’t claim for private calls.
If you have an internet plan for both business and private use, you can claim part of this as a business expense. You can decide how to work out the business proportion, but it needs to give a reasonable result.
Square metre rate option
Instead of working out how much of your home’s utility expenses will be apportioned to your business, you can use the square metre rate option. This uses a rate that IR sets each year based on the cost of utilities per square metre of housing.
The equation for the square metre rate option is: (a x b) + (c x d)
a is the total amount of mortgage interest, rates and rent you have paid during the year
b is the percentage of the total floor area of your home that you use for the business
c is the area (in square metres) of the part of your home that is used primarily for the business
d is the square metre rate that is published by Inland Revenue.
The square metre rate for the 2018–2019 income year is $41.70 per square metre.