Working from home & possible tax deductions – do you qualify?

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With the arrival of the Covid-19 international pandemic, more and more South Africans are adjusting to “the new normal”, with working from home becoming the current reality for many employees.

As you may be aware, the travel costs between your home and your employer’s office are not claimable as tax deductions, but can you now claim for “home office” expenses and how does this impact your taxes?

Currently, SARS tax laws only allow the following taxpayers to claim such related expenses:

• individuals who run their own business from home as a ‘sole-proprietor’/independent contractor can claim certain home office-related expenses (in proportionate 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.

With lockdown, many employees have been able to adapt to successfully working remotely – even with lockdown easing slightly, some individuals may continue to work from home 2 or 3 days a week for the foreseeable future.

With this in mind, some of these employees may end up spending 50% of their average working hours during the current tax year (1.3.2020 – 28.2.2021) working from their homes. Although this has its own benefits (no time spent in peak hour traffic, fewer costs incurred travelling to “work”, earlier start to the day and more time with their families), but can you claim “home office” expenses as a tax deduction from SARS?

Should an individual who earns remuneration comply with the 50% variable remuneration or be required to spend 50% or more of their time away from their employers’ office to perform their duties, they would be allowed to claim certain expenses incurred in relation to their home office.

In recent media articles, SARS has been quoted as saying “full-time employees can also claim if they work from home for at least six months of the tax year. This means that you would have to work from home at least until the end of September, if you left the office at the start of the national lockdown. If an employee’s duties are mainly performed from their home, they will be able to claim some expenses, a SARS spokesperson confirmed to Business Insider SA.”

SARS has also made it a requirement that a home office must be a dedicated space/room used mainly and solely for this purpose 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.

Should any employees want to claim for “home office” expenses, the mandatory supporting documents (invoices, statements, proof of such payment) must be retained together with a schedule of the actual days spent working at home during the tax year. Any communications you have from your employer indicating changes in working conditions while under lockdown would aid in the justification of the claim – however, this would always be subject to SARS review and may be disallowed on assessment.

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.

We would suggest that employees discuss their specific “home-office” situations with their employers and claim on a reimbursive basis – the required supporting invoices with 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 necessary for the employee to be able to perform their work duties from home. This 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.

Employees with structured travel allowances as part of their packages are advised to review these with their employers, especially due to the limited travelling during this current tax year and the justification of such allowances during the COIVD lockdown period (if applicable).

As a firm, our priority in respect of all our Clients, Employees and Associates, is that you all stay safe and healthy during these difficult times.

Please contact me to discuss any questions you may have in relation to this email – we are here to assist you to navigate this challenging period in your business.