Home office claim by business floor area.
Home office claim
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Business-use percentage
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Your breakdown
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Turning a spare room into a deduction
If you run a business from home, whether as a sole trader or through a close company, Inland Revenue lets you claim the business-use share of your household running costs. The logic is fair: part of your power bill, your insurance, your rates and your mortgage interest or rent is genuinely keeping the business going, so you should not pay tax on income you spent on it. The hard part is working out the share, and the cleanest method, the one this calculator uses, is floor area. You measure the area set aside for work, divide by the total floor area of the home, and that percentage is what you can claim against your mixed household costs.
This tool is built for the everyday case: a home-based consultant, tradie doing the books from a study, online seller packing orders in a converted garage. It is not for someone renting a separate commercial premises, where the whole cost is deductible anyway.
Which costs go into the pool
The business-use percentage applies to the costs of running the home as a whole. That typically means power, home and contents insurance, rates, and either mortgage interest (not the principal repayment) or rent. Notice that it is mortgage interest only. Repaying the loan principal is not an expense, it is building equity, so it never enters the calculation. Internet and phone are usually claimed separately on actual business use rather than floor area, because a percentage of a room tells you nothing about how much of your data was for work. Keep the bills and a note of how you measured the area; if IRD ever asks, that evidence is what stands behind the claim.
A 15 square metre office in a 120 square metre home
Suppose you use a 15 m2 room exclusively for work, your home is 120 m2 in total, and your annual running costs across power, insurance, rates and mortgage interest come to $28,000. The claim works out as follows.
A $3,500 deduction is not trivial. For a sole trader on the 30 percent rate, it cuts the tax bill by over $1,000. The chart shows the office as a slice of the floor plan, which is exactly the proportion of costs you can claim.
The square-metre rate shortcut
IRD also publishes a square-metre rate option that lets you claim a set dollar amount per square metre of business-use area to cover utility-type costs, on top of a floor-area share of premises costs like rates and interest. It saves digging through every power bill. The floor-area method this tool uses tends to give a fuller claim when your running costs are high, while the square-metre rate is simpler for low-cost households. Whichever you choose, you must use it consistently and keep the supporting records.
One common trap worth flagging: claim only the area used substantially for business. A corner of the lounge where you sometimes answer emails is hard to defend. A dedicated room, or a clearly demarcated work zone, is much safer. And remember the home office claim can interact with the bright-line test, because there is no general capital gains tax in New Zealand but claiming part of the home as business premises can affect the main-home exemption when you sell, so take advice if you plan to move on.
Can I claim home office costs if I rent?
Yes. Renters apply the same floor-area percentage to their rent, power, contents insurance and any other household running costs. You simply substitute rent for mortgage interest. The mechanics are identical, and renting often makes the claim more straightforward because rent is a clean, documented monthly figure.
Do I need a separate room to claim?
Not strictly, but the area must be genuinely set aside for the business and you need a defensible way to measure it. A dedicated room is easiest to justify. If you use a shared space only part of the time, you would need to reduce the area or the percentage to reflect that, which is harder to evidence, so a defined work area is the safer path.