Business income tax Tāke moni whiwhi mō ngā pakihi

In this section

### Filing business income tax returns

Kilometre rate

Travel expenses

Holiday homes - mixed-use assets

Entertainment expenses

Capital (consumer) contributions

Environmental expenditure

Tracking expenses

### Tax relief - extreme weather and natural disasters

Many people who run a small business use an area in the family home for work purposes. You do not have to have an area specifically set aside for the business. If you are doing this, you can make a claim for the area set aside so long as you keep a full record of all expenses you wish to claim.

If there isn't a separate area for the business the apportionment will need to take into account criteria such as the amount of time spent on income-earning activities and the area used at home.

No deduction is permitted for any private or domestic expenditure.

The responsibility for keeping invoices and records for a home office is the same as for any other business expenses you are claiming. You can claim a portion of the household expenses, such as the rates, insurance, power and mortgage interest. You must keep invoices for these expenses.

You can only claim the expenses that relate to the area used for business. Work out the percentage of the work area, compared to the total floor area of the house. Then apply this percentage to the total house expenses.

Example

In a house of 100 square metres Mereana uses 10 square metres as an office (10% of the total floor area). GST-inclusive house expenses for the full year were:

 Rates \$1,200.00 Insurance (house) \$  400.00 Power \$  960.00 Total costs (including GST) \$2,560.00 Multiply total cost by 3, then divide by 23 to get the GST content \$  333.91 Total costs (excluding GST) \$2,226.09

If Mereana is not registered for GST the amount to claim is 10% of the total costs including GST:
\$2,560 x 10% = \$256

If Mereana is registered for GST the amount to claim is 10% of the total costs excluding GST:
\$2,226.09 x 10% = \$222.60  Mereana can also claim 10% of the GST content of these items in her GST return, she can claim this either annually or on a period-by-period basis.

### Claims on mortgage interest

You may also claim a proportion of the mortgage interest (not principal) paid during the year. There is no GST involved in this item, so it is easier to work it out separately. Use the same method of the business floor area percentage to work out what to claim.

Example

The business floor area is 10%.

 Mortgage interest paid (not principal repayments) \$2,340

The amount to claim is:
\$2,340 x 10% = \$234

Note Depreciation on your home is not claimable from the 2011-12 income year onwards. If you claimed depreciation on your home in prior years you must include the depreciation recovered in your tax return when you cease using your home for business purposes, or when you sell your home. You can claim the depreciation on capital items such as a computer, office furniture and fittings, or shelving, used for business purposes in your home.

### Telephone costs

You may claim a deduction for telephone rental if you run your business or organisation from your home. If your home is the centre of operations or management for the business, you may claim a deduction of 50% of the telephone rental. Identify those toll calls that are business-related. It is a good idea to use a highlighter on your phone bill to mark the business toll calls. If you have a separate commercial and domestic line rental, you can claim the full cost of the commercial line for both income tax and GST, but none of the domestic rental. If you make any private calls on the business line and you are charged for them, you will have to make an adjustment for them.

### Claiming home internet used for business purposes

Home internet costs will generally be a private expense of the household and not claimable. However if you run your business from home you may sometimes need to use the internet as part of carrying on your business.

The portion of the expenditure relating to business usage may be claimable as a business expense. You can't claim any part of the internet expense relating to the household's private usage.

How the proportion of business-related internet expense is calculated will depend on the type of internet plan you have. You must calculate the business proportion you claim by a method that ensures a fair and reasonable result. You must also meet normal record keeping requirements.

### Square metre rate option

A new method will be available for the 2017-18 and later income years to calculate the expenses you can claim for using your home as an office. This method will use rates that Inland Revenue will determine based on the average cost of utilities per square metre of housing, but excluding mortgage interest, rates and rent. You will be able to claim a portion of the mortgage interest, rates and rental costs that you paid during the year based on the percentage of floor area being used for business purposes.

The square metre rate for the 2017 - 2018 income year is \$41.10 per square metre.