Business owner – working from home?

Did you know you can claim home office expense and this can be huge considering the mortgage and rental expense in New Zealand. There are 2 methods of calculating home office expense.

Method1: Home expenses can be claimed by business owners based on the floor area of the house which is used for business. For example, if 20% of your house is used as home office, you can claim 20% of all expenses like Mortgage interest, Residential rent, Rates, Insurance etc,

Method 2: In 2018 IRD introduced a new method giving the existing businesses an option to chose from 2 methods. Under the new method, Inland Revenue determines the rate that can be applied to everything except mortgage interest, rates or rent. The rate is calculated on the average cost of utilities per square meter using information obtained from Statistics New Zealand based on the average New Zealand house.

It’s a little bit like a kilometer rate for vehicles and is subject to change. The current rate for the 2018 income year is $41.10 per square meter. This may suit some taxpayers who would rather not pull all their utility bills together once a year to calculate the actual costs.

Which method is more beneficial for tax payer?

This will depend on your circumstances as every business is different. Whatever method you chose should be reasonable based on calculations and not based on guesstimates as IRD may ask you to prove the figure.

At AccounTrust, we normally calculate sums based on both methods and chose the one which determine the maximum deduction and benefit to the business owner.

If you need help regarding your tax filing, get in touch with us and we will do it all for you while you can focus on other important business decisions.