When using your premises partly for business and partly for other purposes, you may be eligible to claim deductions based on the square metre rate method. This approach ensures that business-related expenses are accounted for in a fair and transparent manner.
The calculation requires determining the portion of the premises primarily used for business. This area must be both obvious and identifiable as a business space, and it must be used for business purposes more than 50% of the time.
The formula outlined in the Income Tax Act 2007, introduced by the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017, is as follows:
Breaking Down the Formula
(Total premise costs × Business proportion): Covers mortgage interest, rates, or rent that can be deducted.
(Business square metres × Square metre rate): Accounts for utility costs that are deductible.
Links
- Income Tax Act 2007 - Square metre rate method
- Operational Statement - Square metre rate for the dual use of premises