Helping You Achieve the Freedoms of Time, Money and Peace of Mind
Claiming home office expenses
July 21st, 2021
Tatiana Gakhovich, Associate CA
Are you a sole trader? If you do some of your work from home, you may be entitled to claim a tax deduction for household expenses related to earning income, such as rates, insurance, power, and mortgage interest.
The amount you can claim is based on the area of your home used for the business, expressed as a percentage of the total area of the home.
Since the 2017-18 and later income years, taxpayers can choose to use the square metre rate method to work out what to claim. Inland Revenue reviews the rate each year for taxpayers to determine how much to claim for general business expenses incurred from the home. The amount you can claim for mortgage interest, rates or rent is calculated separately, based on the area of the home used primarily for business.
What to claim is relatively easy to work out if you have a dedicated home office or workshop. However, you may not need to (or be able to) set aside a specific room for business purposes. Where you don’t set aside a separate space, you may also need to consider how much time you spend on your business as well as the area used to earn income.
In the image:Tatiana Gakhovich and Tasneem Mukadam
Lynch & Associates Limited
Most people who are self-employed can find it difficult to separate work life from home life completely.
Keep written workings of your calculations and be sure to keep records of your outgoings in a safe place.
Trusts and information disclosure
July 8th, 2021
Tatiana Gakhovich, Associate CA
Big changes came through this year that affected trusts and trustee obligations.
The Trusts Act 2019 introduced new presumptions that trustees will make basic trust information available to every beneficiary and provide further trust information to beneficiaries on request. And the introduction of the 39% tax rate brought increased requirements for active trusts to disclose information to Inland Revenue.
The Trusts Act recognises that it may not always be advisable to make basic information available to all beneficiaries. The Act sets out the factors trustees must consider when deciding whether to provide basic trust information and how to respond to requests from one or more beneficiaries for trust information.
From the 2021-22 income year onwards, trustees of complying trusts are required to provide more information to Inland Revenue (IR) on their annual returns. ‘Complying trusts’ are those that have a New Zealand resident settlor and New Zealand resident trustees. The requirement to provide additional information applies to trustees of all trusts that have assessable income and that are required to file a return. IR can also request the additional information for periods up to 8 years prior to the 2021-2022 income year.
Trustees of trusts that have minimal income may make a non-active declaration (IR633) so that they are not required to comply with the new Inland Revenue reporting obligations.
Let us know if changes occur that affect your family trust and catch up with us about your obligations as trustees to disclose information, whether to beneficiaries or to Inland Revenue.