Tax benefits accrue for home offices

Many people, who run a small business, use an area set aside in their family home for work purposes. If you are doing this, you can make a claim for the area set aside, so long as (a) it is used principally for business (such as an office or storage area) and (b) you keep a full record of all expenses that you wish to claim.

The responsibility for keeping invoices and records for a home office is the same as for any other business expenses you claim. You can claim a portion of the household expenses, such as the Council rates, insurance, power and mortgage interest (if you own the house).

You must keep invoices for these expenses.

You can only claim the expenses that relate to the area set aside for business. Work out the percentage of the work area compared to the total floor area of the house. Then apply this percentage to the total house expenses.

An Example

In a house of 100 square metres, Mereana (not a real name), sets aside 10 square metres as an office (10% of the total floor area).

Her GST-inclusive house expenses for the full year were:

Rates $1800

Insurance (house) $ 600

Electricity $1100

Total (including GST) $3500

GST $457

Total (excluding GST) $3043

If Mereana is not registered for GST, she could claim $350, which is 10% of the total costs of $3500, including GST.

If she is registered for GST, she could claim $304, which is 10% of the total costs of $3043, excluding GST.

Mereana can also claim 10% of the GST content of these items in her GST return.

She can claim this either annually or on a period-by-period basis.

Mortgage Interest

You may also claim a proportion of the mortgage interest (not principal) paid during the year. Use the same method of the business floor area percentage to work out what to claim.

Free workshops

If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country.

Visit and enter the search term ‘Seminars.’

Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He will answer your queries emailed to

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