Can I Claim Office Rent and Premises Costs (New Zealand) as a Business Expense in New Zealand?
Rent paid for business premises, offices, warehouses, retail space, co-working desks, is fully deductible in the year it is incurred. Lease incentives received from the landlord must be spread over the lease term and included in income.
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What Inland Revenue (IRD / Te Tari Taake) says
Rent paid wholly and exclusively for business purposes is deductible under Section DB 1 of the Income Tax Act 2007. Prepaid rent for a period beyond 12 months must be spread across the period to which it relates. Lease incentives (rent-free periods, fit-out contributions) are assessable income spread over the lease term. A lease that requires the tenant to restore the premises on exit can lead to a provision, which is deductible only when the cost is incurred. A rent review or a rent-free period at the start of a lease affects the amount recognised each year.
When you can claim
- Monthly rent payments for office, warehouse, retail, or co-working space used for business
- Outgoings charged by the landlord (building insurance, rates proportions) when the lease requires the tenant to pay these
- Fit-out depreciation on leasehold improvements made by the tenant to the business premises
- Co-working memberships and hot-desk fees
When you cannot claim
- Bond paid to the landlord: this is a balance sheet asset until forfeited or refunded, not a deductible expense
- Rent paid to a related party above arm's length market value: IRD may challenge the excess
- Legal costs to negotiate a long lease, which may be capital and spread over the lease term
Good to know
Pro tip: Where a landlord offers a rent-free period or fit-out contribution as a lease incentive, this is assessable income that must be spread over the lease term: factor this into your cash-flow projections when signing the lease.
Important: The GST component of rent from a GST-registered landlord is an input tax credit in the tenant's GST return. Where a company rents from a shareholder at above-market rates, IRD may deny the excess deduction as a non-arm's-length arrangement.
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