Quick answer
The simplest method is the IRD square metre rate: $55.60 for each square metre of business floor area for the 2025 income year, covering your utilities and running costs. On top of that you separately claim premises costs, such as mortgage interest, rates, or rent, based on the business-use percentage of your home. The actual cost method is an alternative that apportions every expense.
Are home office expenses tax deductible in New Zealand?
Yes, where part of your home is used for your business. The IRD splits the cost into two parts. Running costs (power, gas, phone, internet) are covered by the square metre rate, a single figure per square metre of business area. Premises costs (mortgage interest, rates, house insurance, or rent) sit outside that rate and are claimed on the business-use percentage of the home.
This two-part structure is what makes New Zealand different from a single flat-rate system. See the wider New Zealand expense rules for how the home office claim fits with GST and other deductions.
How much can you claim?
| Component | How it is claimed |
|---|---|
| Running costs (power, gas, phone, internet) | Square metre rate: $55.60 per m2 of business area (2025 income year) |
| Premises costs (mortgage interest, rates, rent) | Business-use percentage of the actual cost |
| Office furniture and equipment | Depreciation over its useful life |
The square metre rate is updated each year by the IRD based on average household utility costs, so check the current figure when you file. Worked example. A consultant uses 12 square metres of a 120 square metre home for business, a 10% business-use area. Her square metre claim is 12 x $55.60, which is $667.20. She then adds 10% of her $14,000 of mortgage interest and rates ($1,400), giving a total home office deduction of $2,067.20, plus the depreciation of her desk and equipment.
Record-keeping requirements
Keep evidence of your business floor area and total floor area to support the percentage, plus your mortgage, rates, or rent statements for the premises portion. If you use the actual cost method instead, keep every utility bill and your apportionment workings. GST-registered taxpayers keep the taxable supply information needed to claim GST on the business proportion. Business records must be kept for seven years.
How to claim, step by step
- Measure your business floor area in square metres and your home’s total floor area.
- Multiply the business area by the square metre rate ($55.60 for the 2025 income year) for your running costs.
- Work out your business-use percentage (business area divided by total area).
- Apply that percentage to your premises costs (mortgage interest, rates, or rent).
- Separately claim depreciation on office furniture and equipment.
- If GST registered, claim GST on the business proportion of actual costs and keep records for seven years.
Common mistakes
- Assuming the square metre rate covers mortgage interest or rent. It only covers running costs; premises costs are added separately.
- Claiming GST using the square metre rate, which is an income tax shortcut, not a GST calculation.
- Overstating the business area, or claiming an area not mainly used for business.
- Forgetting to claim depreciation on office furniture and equipment.
- Not keeping the floor-area evidence that supports the business-use percentage.
Software that helps
A home office claim falls apart when the utility and premises records are scattered across the year.
- Hnry builds home office claims into the tax workflow for sole traders.
- ExpenseFlow captures your power, phone, and internet bills, codes each with the correct GST treatment, and syncs them to Xero, so the records behind a home office claim sit in one place.
- Xero stores the premises statements against the business so the percentage is easy to apply at year end.
FAQ
See the answered questions above for the square metre rate, premises costs, the business-use test, GST, and choosing a method.