EXPENSES YOU CAN CLAIM IF YOU ARE WORKING FROM HOME
taxpayer carrying on a business for the purpose of deriving assessable income is
entitled to a deduction for any revenue expenditure or loss necessarily incurred
in carrying on the business.
qualify for deductions, part of your home must be set aside regularly and
exclusively for the business. In
this regard, the place must be used as either:
principle place of business for any trade or business in which you engage|
a place to meet and deal with customers in the normal course of your
conduct administrative and managerial activities (e.g. record keeping)|
|In connection with your trade or business if you are using a separate structure that is not attached to your home or residence (e.g. a studio, garage).|
you qualify for the home office deduction, you may be able to claim a portion of
certain types of expenses that are associated with your home but arenít
deductible by the average and non-business homeowner.
following is a summary of many of the expenses that can be claimed if you are
running a business which is recognised as a business for tax purposes from home:
A taxpayer who uses his or her home partly in furtherance of the conduct of a business is entitled to a deduction in relation to that part of the outgoings which relate to the use of the home for the work-related activities, including:
interest on mortgage,
house and contents
depreciation on portion
of the house and assets supplied to
repairs and maintenance.
rent if the home is
figure what percentage of your home operating expenses and depreciation is
deductible, the usual method is to divide the area used for your business by the
total area of your outbuildings. For
example, if your home and outbuildings measure
400 square metres and you are using 40 square metres for your home
office, you will be able to deduct 10% of certain expenses.
should be careful about apportioning an
appropriate % allocation to all expense claims though, as a number of costs
incurred around the home will have a personal content as well.
with power it is normally
to estimate a reasonable amount which is used for business- in most cases there
is one power account for the whole of the house.
and depreciation claims will be made in proportion of the building area
used for income earning activities divided by the total area of the buildings at
Rates should be claimed
on the basis of the proportion of the land area used for income earning
activities divided by the total land area.
could be made in respect of a room that is not exclusively used for business
activity. In this instance an
apportionment could be based on a criteria such as the amount of time spent on
the income-earning activity.
The following expense claims are allowable:
a taxpayer has only one line rental charge and is using the phone in
furtherance of business activity half the rental cost, regardless of whether
the rental charged is at the domestic or commercial rate.
A claim of more than 50% is allowable if the actual use of the
telephone supports a higher & claim.|
a taxpayer has more that one line rental charge and is using those other
lines for business activity the full rental line charges for those business
lines, but not the line rental charge for that line which is effectively a
business toll charges on your home telephone lines.|
|the Yellow Pages Advertising account for your business which may be charged to your Telecom Account.|
is advisable to analyse business/personal toll calls immediately on receipt of
the toll accounts, as you may forget what calls were for if you donít do this
until the year when your Accountant asks for this.
If your home is your base, you are entitled to claim motor vehicle expenses incurred in derived business income in travelling from your home. These could be claimed in the following manners:
keeping of an analysis of business trips and applying the IRD specified
rates to kilometres travelled.|
|The keeping of a log book against a specific vehicle used, and claiming the total costs relating to that vehicle in proportion to business usage and total usage as per the logbook.|
and immediate write offs are not available against fixed assets (items over $200
which are used over a number of periods).
Instead costs should be phased over a number of periods in the form of
Generally only the following insurance types are deductible:
on business assets.|
|mortgage repayment if the loan is specific to business activity.|
insurances where any benefits that may be paid out are exempt from income tax,
such as personal life and sickness, are not deductible as business expenses.
business taxpayers you will liable to pay ACC Levies.
These are deductible as expenses for tax
should claim expenditure on newspapers, journals, periodicals, books and other
publications. If you claim a
portion of the home newspaper for the business this percentage should have some
relationship to the business usage.
regard to the deductibility of occupational
clothing of a business taxpayer, the basic issues must be whether the
expenditure was relevant and incidental to the derivation of gross income or was
necessarily incurred in carrying on a business for the purpose of deriving
income. To claim it you would
have to show that the clothing is specifically required for that business (e.g.
protective overalls) or it is distinctive to that business (e.g. clothing
emblazoned with monograms of the business).
carried out specifically for business is deductible, but certain
business-related entertainment is subject to a special regime which only allows
a claim of 50%.
such as invoices or receipts must be kept to support claims for all
entertainment expenses. Records
should be kept of the date the expenses were incurred, the name of the persons
entertained, the business they represent, the position they hold, and the
reasons for the entertainment.
Paid on Money Borrowed for the Business
Only interest paid is deductible, not the total amount of loan repayments if they are on a principle and interest basis. Statements should be obtained from your lender which clearly identify the interest, and an apportionment should be processed if the loan was not totally business related.
This summary does not represent the total expense categories that can be claimed. There are likely to be others, depending on the type of home business.
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