When premises are used partly for business purposes and partly for other purposes, a square metre rate can be used to calculate the deduction.1 This calculation methodology requires calculating the area of the buildings on the premises used primarily for business(in square metres). This area needs to be obvious and identifiable as being used for business purpose. This area also needs to be used for the business purpose more than 50% of the time.2
The formula provided in the ITA 20071, inserted by Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 is
(total premise costs × business proportion) + (business square metres × square metre rate).
The part, business square metres × square metre rate, gives the cost of utilities available as deductions.
The part, total premise costs × business proportion, calculates mortgage interest, rates or rent available as deduction
1.https://www.legislation.govt.nz/act/public/2007/0097/latest/DLM1513613.html
2.https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/operational-statements/os1903.pdf