Working From Home And Possible Tax Deductions – Do You Qualify?
After 2 years of Covid, how has SARS aligned the tax deductions with the “new normal” with many South Africans still working from home (permanently or temporarily) – can you claim for “home office” expenses, and how does this impact your taxes??
Currently, SARS tax laws still only allow the following taxpayers to claim these expenses:
- individuals who run their own business from home as a ‘sole-proprietor’/independent contractor can claim certain home office-related expenses (in proportion to the area used for their dedicated office) – i.e. “self-employed persons”; or
- individuals who earn 50% or more of their income as variable remuneration (i.e. commissions/bonuses) and spend 50% of their working hours away from their employer’s offices
An individual who earns remuneration of less than 50% variable remuneration, who is required to spend 50% or more of his/her time away from his/her employer’s office to perform his/her duties, would be allowed to claim certain expenses incurred in relation to his/her home office.
Over the 2021 tax year, SARS has reviewed the majority of “home office” expense claims for validity and found more than 60% of the claims were invalid!
The 3 crucial requirements for SARS to allow the “Home office” expense claim are:
- The employee’s duties are mainly performed in his/her own home office;
- The office is regularly and exclusively used for the purposes of his/her work ie it must be a dedicated space/room used mainly and solely for this purposes to be regarded as a “home office” (a corner of your dining room table will unfortunately not be regarded as a ”home office” for tax purposes); and
- The office is specifically equipped for these purposes.
During Covid, many employees were able to adapt to successfully working remotely. Most individuals are slowly returning to their work offices full-time or continuing to work from home 2 – 3 days in the week. Therefore, some employees may work more than 50% of their average working hours during the whole tax year (1.3.2022 – 28.2.2023) from their employer’s offices and less than 50% from their home offices.
SARS are also asking taxpayers to justify their home offices claims via the following:
- Schedule of the actual days spent working at home during the tax year vs dates where the employee worked at their employer’s office to justify the “mainly” requirement (more than 50% of the time)
- 360-degree pictures of the home office
- Plans of the house and specific area of the home office (with details of square meterage of each)
- SARS will also request mandatory supporting documents (invoices, statements, proof of such payment)
Important note to keep in mind – should you be claiming a tax deduction for home office expenses, this will impact any future Capital Gains on the sale of the property. The portion used as a home office will be excluded from the primary residence exemption upon sale.
Effective from 1 March 2022, SARS will no longer accept the claiming of bond interest as part of “home office” expenses.
We would suggest that employees discuss their specific “home-office” situations with their employers and consider claiming on a reimbursive basis with the required supporting invoices and necessary authorisation/approval from their employer. These costs can include cell phone, internet, or fibre costs where these have been used mainly in their employer’s business and are necessary for the employee to be able to perform their work duties from home. These will be regarded as reimbursive costs and not subject to employees tax.
Should an employee acquire any assets (i.e. computer, laptop, or printer) on behalf of their employer to use in their home to perform their work-related duties, the employer can claim the VAT input on such reimbursements – NB the employer’s details must be on the invoice or SARS will disallow the VAT claim
Please contact me to discuss any queries you may have as this is a highly technical area now and is subject to intense scrutiny by SARS. However, it does not mean that you should not claim these expenses where you have a valid right to the tax saving.