Small Business Tax Dictionary
Square Meter Rate Rule (NZ IRD)
The Square Meter Rate Rule is a calculation method in New Zealand for determining home office expense deductions. It works by measuring the floor area used for business activities and comparing it to the total area of the home.
How the Square Meter Rate Rule works
Inland Revenue (IRD) sets a rate per square meter each year. To calculate your deduction:
- Measure the floor area of your dedicated home office (in square metres)
- Multiply by the IRD's published square meter rate for that income year
- Add a percentage of your mortgage interest or rent, calculated using the floor area ratio
The resulting figure represents your total home office deduction for the year.
What expenses does it cover?
The square meter rate covers:
- Running costs — electricity, gas, internet, and other general home running expenses (included in the per-square-meter rate)
- Occupancy costs — mortgage interest or rent are claimed separately as a percentage of the business floor area relative to total floor area
This provides a clear and straightforward approach to apportioning home office costs, without needing to track every individual utility bill.
When can you use it?
The Square Meter Rate Rule is available when:
- You have a dedicated workspace in your home used mainly for business (an exclusive use area)
- You are self-employed, a sole trader, or a partner in a partnership
Employees working from home are generally not eligible to claim home office deductions under this rule.
Why the Square Meter Rate Rule is useful
This method provides simplicity and certainty. Rather than gathering and apportioning dozens of individual receipts, you use a single IRD-approved rate that already accounts for typical running costs — making compliance straightforward and record-keeping manageable.