Home Office Expenses for Self-Employed Workers in NZ

If you’re self-employed and work from home, you can claim a portion of your household expenses as a business deduction. This reduces your taxable income and the tax you pay — but you need to calculate your claim correctly and keep good records.

Who Can Claim?

You can claim home office expenses if you:

• Are self-employed or operate a business from home
• Use a specific area of your home regularly and exclusively (or primarily) for business
• Don’t have a separate business premises where you perform the same work

Employees working from home generally cannot claim these expenses (your employer should reimburse you or provide the facilities).

What Expenses Can You Claim?

Claimable household expenses include:

• Mortgage interest or rent
• Rates (council rates and water rates)
• Insurance (house and contents)
• Electricity and gas
• Internet and phone (business portion)
• Repairs and maintenance to the home
• Depreciation on the home office portion (for homeowners of commercial properties)

You can also claim the full cost of items used exclusively for your business, such as office furniture, a desk, computer equipment, and stationery.

Calculating Your Claim

Floor Area Method

The most common approach is the floor area method:

1. Measure your home office area (e.g., 12 sqm)
2. Measure your total home area (e.g., 120 sqm)
3. Your business percentage: 12 / 120 = 10%
4. Apply this percentage to eligible household costs

Example: Total eligible household costs are $25,000 per year.

• Home office claim: $25,000 x 10% = $2,500 deduction

Adjusting for Time

If you don’t use your home office for business all year (e.g., seasonal work), you should adjust the claim to reflect the actual period of business use.

Similarly, if the space is also used for personal purposes (e.g., a shared living area used as an office during work hours), you may need to make a further time-based adjustment.

Internet and Phone

For internet and phone costs, you can claim the business-use percentage. If you estimate 60% of your internet use is for business:

• Annual internet cost: $1,200
• Business claim: $1,200 x 60% = $720

If you have a dedicated business phone line, the full cost is deductible.

Records to Keep

IRD requires you to maintain records that support your claim:

• Receipts or invoices for all household expenses claimed
• Floor plan or measurements showing the office area and total home area
• A logbook or diary of business use (especially for shared spaces)
• Records of how you calculated the business-use percentage for phone and internet

Keep these records for seven years from the end of the tax year.

Common Mistakes

• Overclaiming: Only claim the genuine business portion. IRD can audit and disallow excessive claims.
• Claiming capital costs as expenses: The cost of building or renovating a home office is a capital expense — depreciate it rather than deducting the full amount.
• Ignoring the personal use component: If your home office doubles as a guest bedroom, you need to reduce your claim accordingly.
• Not claiming at all: Many self-employed workers miss out by not claiming legitimate home office costs.

Impact on the Main Home Exclusion

If you claim home office deductions, it generally does not affect the main home exclusion from the bright-line test, provided the office is part of your home (not a separate building). However, if a significant portion of your home is used for business, seek specific advice.

Sources

• Home office expenses — IRD
• Record keeping — IRD