Claiming Office Expense

[Clark Kent]

At the moment i have one rental property, purchased at the start of this year. Currently getting my accounts in order order for the accountant. Intially spoke to the account a couple of weeks ago and we went through a number of things. One of which was that he advised not to claim on home office expense as i only have one property. We have a dedicated office in the house for doing property investing related work.

Interested to know how many of you claim this expense and in my situation should i try another accountant and claim this expense.

[k1w1]

With just one property I would be very wary of doing this, especially given the recent reports of the taxman getting tough.

[shareprofit]

I claim office space

My office is 8% of total floor area. Therefore I claim 8% of rates, power, insurance, mortgage if I had one and 50% of phone rental. I do not claim depreciation.

[freeloader]

What if you live in a one bedroom or studio and share with your boyfriend can you claim 8% of your rent as office expense?

[CJ]

What if you live in a one bedroom or studio and share with your boyfriend can you claim 8% of your rent as office expense?

In theory, the % is the area that is designated as an office. It cant be used for anything else.

There is case law on this where a lecturer used the dining room but he proved he never used it for eating, only for work

[Re@der]

Claiming office space to rent one house seems to be excessive. I would have thought that you would need 3 or 4 before you could start. I suppose that if you had a room that you only did this then no problem. But realistically 5 minutes a week to check whether the rent has been paid is probably not going to pass any IRD check for reasonableness. Buying house expenses initially need to be capitalised and depreciated not claimed as an expense.

[Clark Kent]

I had a look at an accountants questionnaire last night i found on the net and it seems that you would claim home office expense if you had 2 + rentals. I dont want the REV knocking on my door so will omit it from my claimable expenses.

[Wayne]

I don't claim for the office as it isn't worth the effort being only 3% of the house. I look at the $ in the end and don't claim every possible little bit. I hope that when we get audited I will look reasonable (some hope probably).

[Tan]

A few years ago I called IRD and they sent a very useful friendly guy out to help me set up my tax things. Can't remember his job title now, but he looked at teh place and told me what I could claim. Was a fair assessment when I look back, and the guy was free.
You could try calling your local office & asking for help like that.

[revdev]

I dont want the REV knocking on my door..

It's too late..I know who you are and I know where you live!

[Perry]

Wait a mo'

Strikes me that any number is arbitrary.

If you have a dedicated office area and
you plan to expand your rental portfolio,
I say claim it. Changing your accountant
over this point seems rather drastic. You
said he 'advised.' If that's all, you simply
need to say, 'thanks, I've considered the
advice and I've elected to go ahead and
claim for the office space/costs. Please
include it in my tax return. Here is all the
necessary information.'

Your accountant has proffered advice;
you've considered the advice and weigh-
ed other points-of-view and consequently
formed the reasoned view that the claim
for office expenses is legitimate.

Although I doubt it would ever come to
it, the foregoing process demonstrates
(to the IRD) that you have evaluated
the situation and have adopted what
you think is an acceptable tax position
(or whatever the jargon is nowadays)

Background

Taxpayers who rely on the advice of a tax agent will usually be considered to have exercised reasonable care. This principle was not set out in the legislation but had developed over time through practice. The practice was that taxpayers who use an agent may still be exposed to a penalty for not taking reasonable care if they:
failed to provide adequate information when seeking advice;
failed to provide reasonable instructions to a tax agent; or
unreasonably relied on a tax advisor or on advice that they have reason to believe is not correct.

Probably worth reading the entire page.

[Green Fish]

Agreed. This is not a legal issue. It's an issue about evidence.

[Perry]

But realistically 5 minutes a week to check whether
the rent has been paid is probably not going to pass
any IRD check for reasonableness.

The IRD - reasonable?

If only 5 minutes a week was all there was to it.

Like the number of houses being arbitrary, the
number of minutes is much the same. The RTA
requires LLs to keep records. In the office seems
a good place for those. What about a place for
the PC used to check rent payments? Or
lodge TT applications on-line? Or write '10 day
notice' letters.

As posted elsewhere on the PT forums, the IRD is
all about maximising tax collection and ensuring
that taxpayers comply with their tax responsibilities.
It is not about ensuring taxpayers make full use of
their tax deduction entitlements.

That's for you and your accountant.

[Rosco]

Be realistic

My main comment would keep it realistic. I see tonnes of property investors with 1 rental trying to claim 20% home office, when they have an office, that is also a bedroom, and also the kids use the computer, and also used the person PAYE wages (ie nothing to do with rental business). In these cases its just a joke.

If you have one rental, and you have a office that you use soley for rentals, then it is claimable (not buying rentals as this is capital). As an accountant I would question a client who does this, so IRD would probably look hard as well.

Ross

[Clark Kent]

I probably spend about 15-20 mins a week checking bank account, filing paper work, imputing figues on to a spreadsheet in the office at home. Will wait until i have another rental until i start to claim, last thing i want to do is draw IRD attention to my illegal Bingo and Housie evenings.