To help you get started with claiming what you’re entitled to, we’ve created this handy guide. Let’s begin with a list of the types of expenses you’re allowed to claim.

What can you claim as a home office expense?

To work out the business-related portion of household expenses, you usually use the floor area of your work area (office, workshop or garage) as a percentage of your home’s total floor area. We provide examples of how to do this in the next section. The percentage you decide on applies to many home office expenses. 

Common home office expenses you can claim for tax

You can claim the office floor area percentage of these household expenses:

  • Rent – the rent you’ve paid for you and your family, but not the part of the rent that any flatmates have paid
  • Mortgage interest – if you own the home and have a mortgage you can claim the interest paid, but not the principal repayments of the money you borrowed
  • Rates – The rates you pay to your local body council for your home
  • Water – if your home has water bills
  • Insurance – house insurance and contents insurance for your home
  • Security system – installation, monitoring and maintenance costs, but not the initial price to buy the system
  • Repairs and maintenance – the amounts paid to repair or maintain your home, but not the time spent doing the work yourself and not for any substantial value-adding additions or alterations
  • Cleaning – cleaning products for your home and any money paid for commercial cleaning, but not for time that you spend doing it
  • Handwashing soap and toilet paper – the cost of any hand wash, hand soap and toilet rolls you buy for your home

You can claim more than the office floor area percentage of these household expenses:

  • Electricity and gas – you usually claim the floor area portion, but if you can show your work typically uses more, you can claim that percentage 
  • Phone and internet – these are normally claimed at a 50% rate, but business toll calls and the cost of a phone that’s only used for business can be claimed for the full amounts
  • Office supplies – you can claim the full cost of home office consumables, such as printer ink, pens and paper
  • Office equipment  – if you buy home office furniture or equipment for less than $500 you can claim the full amount; if it’s more than $500 you can only claim the annual loss in value, using a standard percentage of the item’s depreciated value, at the start of each year

How to calculate the floor area percentage for home office expenses

As you can see, most home office expenses are based on a fixed percentage of your household expenses. You only have to calculate this percentage once, then you can keep using the same value until you change your office or its use.  

Here’s how to calculate the home office area percentage for your situation:

  1. Look up the floor area of your house (not the land area) on a free website like homes.co.nz or propertyvalue.co.nz
  2. Calculate the floor area of the office, workshop or garage you use at home for business by measuring its width and length, then multiplying the two together
  3. Divide the business-related area by the total house area to get a percentage

Example:

  1. House floor area is 150 square metres
  2. Home office is 3 metres wide by 5 metres long = 15 square metres
  3. 15 divided by 150 = 0.10 = 10%

You can include any area you use to store business-related things, such as cupboards or an area in your attic or garage. However, you can’t include the area of a bathroom, kitchen or lounge unless it’s only ever used for business purposes, i.e. only by employees or customers.

What if your home office also has personal use?

If your home office or workspace is also used for non-business purposes on a regular basis, then you need to work out the percentage of time it’s used for business and adjust the amounts you claim accordingly.

For example, if the home office in the calculation above was only used half of the time for business and the rest of the time for something else, like a bedroom, then the claimable percentage would be halved to 5%.

Inland Revenue’s fixed rate option for home office expenses

To save you having to keep copies of all your household utility bills, Inland Revenue provides the option to use a single rate per square metre of home office. They update the rate each tax year. For the year ending 31 March 2022 the rate was $47.85 per square metre.

For the 15 square metre office in the above example, this would allow you to claim 15 x $47.85 = $717.75 for utilities (power, gas, internet, phone etc) for the year.

This doesn’t include council rates, mortgage interest or rent costs. You still have to work these out using the percentage floor area method above, then add that onto the amount you’re claiming for utilities. It also doesn’t include the claimable costs for office supplies, equipment and furniture.

How to claim GST on home office expenses

If you’re not registered for GST, use the GST inclusive amounts paid for expenses in your calculations. That way you still get to claim the GST you’ve paid on business expenses, such as home office expenses.

If you’re registered for GST, you have to use GST-exclusive amounts for income and expenses when calculating your profit and your income tax to pay. The GST amounts are treated separately in your regular GST returns.

When it comes to your GST return, for home office expenses you simply apply the same floor area percentage you used for the income tax expense calculations.

It’s important to remember that rent and mortgage interest expenses do not include GST, so keep them out of your GST calculations.

If you use Inland Revenue’s fixed rate for home office utilities option, these expenses should also be kept out of your GST calculations.

Consider using accounting software

Once you know what expenses to claim and what percentage to use for home office expenses, software packages like Afirmo’s sales, money and tax tools do all the calculations for you. And Afirmo will even securely download your bank account transactions, so all you have to do is allocate these to a category – like home office expenses. The rest is done for you, right through to filing your returns online. To learn more check out Afirmo’s Tax Tool.