If you run a business from home, or use part of your home primarily for business purposes, you can often claim a proportion of household costs as business expenses.
So, how do you calculate this? Well, traditionally, the process has felt time-consuming and admin – heavy for many. Picture scouring through expenses to confirm how much was spent on power or insurance, determining the business-use percentage for each household cost based on the size of your home office, and then passing all that information on to your accountant.
It definitely doesn’t sound like the easiest or most exciting process.
Learn more about the traditional method of calculating home office expenses and general guidelines in our blog: The dos and don’ts of claiming home office expenses
Square metre rate option
Fortunately, the square metre rate method offers a simpler alternative that removes the hassle of manual calculations.
To calculate your home office claim, simply provide your accountant with the following details where applicable:
- Total floor area of your home
- Floor area of your home used for business
- Annual mortgage interest
- Annual rates
- Annual rent (if applicable)
With these few pieces of key information, we can calculate your claim with a simple formula that factors in the square metre rate published by Inland Revenue for that tax year.
For many business owners, this approach reduces record-keeping requirements and simplifies the annual calculation process.
What costs are covered?
The square metre rate is intended to cover costs such as:
- Power
- Water
- Internet
- Home Insurance
Mortgage interest, rates, and rent are calculated separately based on the proportion of your home used for business and are added to the claim where applicable.
What to be aware of
- You should always keep supporting documentation for claimed home expenses.
- You cannot claim depreciation on your home. However, depreciation can be claimed on business equipment in your home such as a computer or piece of furniture.
- If your business operates through a company, the company may be able to reimburse you for the use of your home office rather than you personally claiming the expense.
A simpler process
If you are tired of manually apportioning each household expense, the square metre rate method provides a simpler approach for many business owners.
In most cases, only a few key figures are needed for us to calculate your home office expense claim. This means less time spent on administration and more time focused on running your business.