Claiming ‘work from home’ expenses for tax purposes

As we kick-start the tax filing season for individuals (1 July, 2021 – 23 November, 2021), many are wondering if they can claim home office expenses on their tax returns. We live in unprecedented times where most people are working from home due to the impact of Covid-19. The question is, can one claim the home office expenses they are incurring as they work remotely? According to the South African Revenue Services (SARS), the answer is yes, but only under very specific circumstances.

Considerations to be taken

Tax payers need to note the following in considering whether to claim for any related expenses: 

  • The home office must be appropriately equipped, used regularly and must have been set up at the place of primary residence solely for the purpose of working. 
  • The home office must have been used for more than 50% of the employee’s duties if the employee’s remuneration is only salary.
  • If the employee earns more than 50% of their remuneration from commission or other variable payments based on work performance, more than 50% of the employee’s duties must have been performed outside of an office provided by your employer.
  • Any home office expenses must be associated with employment use and must be verifiable
  • Home office expenses must be claimed against source code 4028 in the income tax return.

In a recent SARS webinar, SARS commissioner Edward Kieswetter said: “We really want to caution taxpayers to correctly and truthfully complete their returns, as this behavior will be detected.”

What constitutes home office expenditure?


Typically, the type of home office expenditure referred to in section 23(b) of the income tax act includes:

  • Rent of the premises;
  • Cost of repairs to the premises;
  • Expenses in connection with the premises.

In addition to these expenses, other typical home office expenditure may include:

  • Rates and taxes;
  • Cleaning;
  • Office equipment; and
  • Wear-and-tear.

How do I calculate home office expenses?


Home office expenses are calculated on a pro-rated basis – the square meters of area of home office versus the total square meters of your home. Should you qualify for a deduction in respect of home office expenses, the amount must be calculated on the following basis: A / B x total costs, where:

  • A = the area in m² of the area specifically equipped and used regularly and exclusively for trade e.g., employment
  • B = the total area in m² of the residence (including any outbuildings and the area used for trade in the residence)
  • Total costs = the costs incurred in the acquisition and upkeep of the property (excluding expenses of a capital nature). 

“Note that only expenses relating to the premises must be apportioned based on floor area, such as for example rent, interest on bond, rates and taxes, cleaning, etc.” SARS said.

Conclusion

At B-Advisory, we have a team of experienced tax professionals who possess the knowledge and a deep understanding of the South African Income Tax Act to assist you navigate a myriad of tax needs. Contact us today if you need the help of exception tax professionals with technical skills and an integrated approach that extends far beyond filing and compliance issues. 

“Tax complexity itself is a kind of tax.” – Max Baucus