Claiming home office expenses

Are you a sole trader? If you do some of your work from home, you may be entitled to claim a tax deduction for household expenses related to earning income, such as rates, insurance, power, and mortgage interest. If you operate through a company or trust as well as in a partnership, the home office claim also applies and is available to be included in your financial results.

The amount you can claim is based on the area of your home used for the business, expressed as a percentage of the total area of the home.

Since the 2017-18 and later income years, taxpayers can choose to use the square metre rate method to work out what to claim. Inland Revenue reviews the rate each year for taxpayers to determine how much to claim for general business expenses incurred from the home. The amount you can claim for mortgage interest, rates or rent is calculated separately, based on the area of the home used primarily for business.

For items claimed with GST if you’re GST registered, such as rates, insurance, or repairs & maintenance, an adjustment to your GST return is available for the claims. They are considered GST inputs in due course.

What to claim is relatively easy to work out if you have a dedicated home office or workshop. However, you may not need to (or be able to) set aside a specific room for business purposes. Where you don’t set aside a separate space, you may also need to consider how much time you spend on your business as well as the area used to earn income.

Most people who are self-employed can find it difficult to separate work life from home life completely. Keep written workings of your calculations and be sure to keep records of your outgoings in a safe place.

‍