To curb the spread of C-19, President Ramaphosa placed the country under lockdown at the end of March and most South Africans were forced to work from home remotely. This resulted in many employees having to set up a home office.
Before the lockdown, the working culture was already evolving into more and more people working from home. Employers are now providing the option to their employees to work from home to avoid precious productive time being lost in the daily commute to the office and back home.
SARS is normally very rigid when it comes to employees deducting any tax-deductible expenses from their salaries. SARS, however, does allow certain home office expenses under very certain specific circumstances
Who can claim home office expenses?
There are two categories of employees who can claim home office expenses:
Category 1
Where annual remuneration is more than 50% variable i.e. commission-based, and they spend at least 50% of their working time away from their employer’s premises; OR
Category 2
Those employees whose variable annual remuneration is less than 50% but they spend more than 50% of their working hours working from a home office.
The types of expenses an employee can claim for each category are:
Category 1
- Rent;
- Interest on mortgage bond;
- Repairs to the premises;
- Rates and taxes;
- Cleaning;
- Wear and tear;
- Telephone;
- Stationery;
- Wi-Fi;
- Repairs to the printer; and
- Other expenses relating to the house.
Category 1
- Rent;
- Interest on mortgage bond;
- Repairs to the premises;
- Rates and taxes;
- Cleaning;
- Wear and tear; and
- Other expenses relating to their house.
How do you calculate the home office deduction?
The deduction of the expenses mentioned above is limited to the percentage of the square meterage used for business use. In other words, the proportion that can be claimed is calculated by dividing the total square meterage of the home study by the total square meterage of the house and then converting this to a percentage. Thereafter, apply the percentage to the home office expenditure to calculate the portion that is deductible.
For example, the square meterage of your home office (20m2) in relation to the house (200m2), therefore, the percentage is 10% (20m2/200m2 x 100). Only 10% of the office related expenses will be tax-deductible.
What are the additional requirements for Category 2 employees to claim their deduction?
- The employer must allow the employee to work from home;
- The employee must spend more than half of their total working hours working in their home office;
- The employee must have an area of their home which is used exclusively for this purpose; NOTE: Employees utilizing their dining room as a desk or boardroom at home would not qualify.
- The office must be specifically equipped for the employee’s trade, i.e. it must be specially fitted with the relevant instruments, tools, and equipment required for the employee to perform his or her work.
Which supporting documents will be required?
South Africa Revenue Services (SARS) frequently request supporting documents from the employee to support their home office tax deduction claims.
The taxpayer will be required to submit scanned copies of invoices, as well as all relevant calculations to substantiate the percentage of home office expenses claimed.
If the supporting documentation is unclear or insufficient, SARS will disallow the deduction so always make sure you keep adequate records for your tax practitioner to submit.
What is the trade-off for claiming home expenses against taxable income?
An individual who sells his or her primary residence is normally able to exclude a full R2 million of the net proceeds from the taxable capital gain as a tax perk. This is called a primary residence exclusion.
Where an individual has claimed home office expenses, this tax perk will be reduced. The reduction of benefit is calculated on the same basis as a percentage of floor space used by the office claimed over the total floor space of the primary residence. For example, if the home office previously used makes up 10% of the entire floor space of the house, then the total primary residence exclusion will be reduced to R1,800,000 (R2,000,000 less (R2,000,000 x 10%)).
This only applies where a primary residence is owned by an individual person and not a company, close corporation, or trust. In this instance, there is no primary exclusion at all.
If you have not already done this, please get hold of us so that we may assist you with the PAIA manual as well as the internal procedures which set out advance data subject participation and internal POPIA training. We can set up a Zoom, Microsoft Teams, WhatsApp or traditional call meeting.
Email: hello@omne.co.za/new
Landline (087 802 7811)
Landline (087 802 7811)
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