The threat of the COVID-19 pandemic resulted in a national lockdown in South Africa that commenced on 27 March 2020. This has brought about a significant change whereby many employees are now being required to work from home.
The question now arises as to whether these employees will be entitled to claim any home office expenses incurred during the period that they are required to work from home.
In this article I have focused on the requirements that must be met by a normal salary earner in order to potentially claim a tax deduction for working from home.
There are specific criteria that needs to be met before a normal salary earner can qualify for a home office deduction for tax purposes. Due to the controversy over the deductibility of home office expenses, SARS has issued some guidance over the years that should be considered.
All of the following must be met in order to claim a home office deduction:
- The home office needs to be specifically equipped for purposes of the employee’s trade
The employee’s home office needs to be specifically equipped & designated for their trade. This means that working in the dining room would exclude you from claiming the deduction as the dining room table is not specially equipped & designated for your trade. The space has to be fitted with tools & equipment required for the employee to conduct their trade.
- The home office is regularly and exclusively used for trade purposes
An employee has to use their home office on a regular basis and not just for example two days a week. If you were able to work from home during lockdown, you would have used your home office on a regular basis, namely 5 days a week.
The home office should also be used exclusively for the purposes of the employee’s trade. This means that the home office is only available for the employee’s trade purposes. It cannot be used as a spare bedroom or the kids’ playroom. It has to be used exclusively for trade purposes.
- The employee’s duties are mainly performed from the home office
An employee has to perform their duties mainly from their home office. This means that more than 50% of their duties have to be performed from their home office.
Therefore, if an employee was working from home since 27 March 2020 up to the end of September 2020, the employee may qualify for certain home office expense deductions in the February 2021 year of assessment, if all criteria have been met.
Once an employee meets all of the requirements, they would be able to claim certain expenses in their annual income tax return.
This could include:
- Rental expense
- Interest on bond
- Cost of repairs to the premises
- Rates & taxes
- Wear & tear on office equipment.
For expenses that relate to the entire house, they would need to be apportioned in the ratio of the home office space as a percentage of the entire house.
It should be noted that, in comparison, commission earners working from their home office may claim certain additional expenses incurred in the production of the commission income.
This could include:
- Cell phone & data costs
- Travel expenses
- Stationary cost
A salaried employee working from home may have incurred certain expenses i.e. data costs or purchased home office equipment. It is very important to understand the different tax implications with regards to the funding of the said expenses.
Should the employer provide the employee with an allowance per month to cover expenses, for example monthly data cost, this allowance will be…
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Read the full article by Engela Crocker, Regional Divisional Director Tax Johannesburg, RSM SA Consulting, as well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2020 edition of BusinessBrief.
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