In a previous blog post from 19 June 2018 we detailed the two options for calculating home office expense claims: the standard calculation method, and the new square metre rate method which became available from the 2018 income year onward.
The square metre rate is a simplified way of claiming tax deductions using a rate set by Inland Revenue each year. The rate is based on Statistics NZ data on the cost of utilities per square metre of housing.
Inland Revenue have set the square metre rate for the 2018-2019 income year at $41.70 p/m2. The adjustment, up from the previous year's $41.10, reflects the annual movement of the Consumer Price Index for the twelve months to March 2019, which showed an increase of 1.5%.
Unlike the standard calculation method, the square metre rate method does not require calculating business-use percentages on every invoice, or keeping those invoices in order to make a claim.
To calculate using the square metre rate the equation is:
(a x b) + (c x d)
a = the total amount of mortgage interest, rates and rent you have paid during the year
b = the percentage of the total floor area of your home that you use for the business
c = the area (in square metres) of the part of your home that is used primarily for the business
d = the square metre rate published by Inland Revenue.
If you have any questions regarding the square metre rate method or home office expense claims, please contact us - we will be glad to assist.