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Using your home for business

If you’re self-employed and run your business from home, you can claim the part of your house you use for business as an expense in your tax return.

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What you can claim

You can claim for any space you use primarily for your business. This could be:

  • your home office
  • your garage if you use it to store stock
  • your workshop.

You need to work out the percentage of your home that you use for business — this is the percentage of your household expenses you can claim.

Example

If your house is 100 square metres and your office is 10 square metres, you can claim 10% of what you pay in:

  • insurance
  • rates
  • power
  • rent.

Claiming expenses

If you’re registered for GST, you’ll need to remove the GST content of each expense and claim it separately in your GST return.

If you own your house

You can also claim a percentage of the interest you pay on your mortgage — but you cannot claim repayments of the principal. There’s no GST on this, so it does not matter if you’re registered for GST or not.

Insurance

Talk to your insurer to make sure you’ll be covered under your insurance if you work from home. Household insurance does not cover your property if you use it for work.

Insurance cover for contractors

Claiming phone costs

If you:

  • use your home landline for business calls and run your business from your house, you can claim 50% of the line rental
  • have a separate phone line for your business, you can claim 100% of that line — but nothing for your home landline
  • use your mobile phone, you can claim the cost of any business calls you make.

You can also claim business-related toll calls.

How to claim

You need to keep a record of all your expenses.

Example

If you use your mobile phone for business calls, you need to record:

  • the date and number you called
  • the reason for your call
  • how much it cost.

At the end of the financial year, you (or your accountant) works out your taxable income by taking all your expenses off the total amount you earned. You pay tax based on this number. If your expenses are high, your income will be lower and you’ll pay less tax.

Inland Revenue sets the rates for calculating expenses. There is a new way to calculate expenses like insurance and power based on the average cost of utilities per square metre of housing. It excludes mortgage interest, rates and rent.

Business income tax — using your home for the business

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