Thokozile Kumalo | Tax Consultant | Tax Consulting SA | mail me |
Many South Africans working from home are asking which home office expenses they can claim as tax deductible items. They also want to know how to claim them correctly.
This question is especially relevant for the growing number of South African employees working remotely for global companies. Increasingly, these employees are turning to tax practitioners for guidance regarding home office tax claims.
While home office deductions may seem straightforward, the Income Tax Act contains specific provisions that regulate these claims. Commission earners generally have more flexibility. However, salaried employees working from home often face challenges because stricter rules apply to them, which directly affects their eligibility for home office tax claims.
Grounds for claiming home office expenses
If you earn only a fixed salary, work from home full time and use a dedicated space solely for work, there may be grounds for claiming home office expenses. You must, however, meet the strict requirements set out in law to succeed with your home office tax claims.
The three key sections of the Income Tax Act that govern these deductions are:
- Section 11(a) – General deduction formula.
- Section 23(b) – Use of home for trade.
- Section 23(m) – Limitations for salaried employees.
The law
Section 11(a), often called the “general deduction formula,” allows a taxpayer who is ‘carrying on a trade’ to deduct ‘expenditure and losses actually incurred in the production of income, provided such expenses are not of a capital nature.’
In the context of a salaried employee, “trade” includes employment. Therefore, an employee who earns remuneration is regarded as carrying on a trade in the form of employment. If a salaried employee incurs home office expenses in the production of employment income, those expenses conceptually fall within the scope of section 11(a). Understanding this is essential for properly structuring home office tax claims.
It is important when claiming home office expenditure to apply section 11(a) together with the limitations imposed by section 23.
Section 23(b) imposes a specific prohibition against claiming deductions for expenses related to premises ‘used for domestic or private’ purposes.
However, an exception exists when:
- There is a dedicated area used for employment purposes,
- That area is specifically equipped for employment, and
- The area is regularly and exclusively used for employment.
For salaried employees (not commission earners), more than 50% of their duties must be performed in the home office. The home office must also be a clearly defined and exclusive workspace.
For full-time remote workers with a defined, exclusive home office, this means you may qualify in theory. Many salaried employees meet the conditions under section 11(a) and 23(b), which often raises hopes for a successful claim. But this is where the biggest hurdle appears.
Section 23(m) disallows most deductions under section 11 for employees who:
- Earn remuneration (i.e., salary), and
- Do not earn more than 50% of that income as commission or variable-based remuneration.
For taxpayers who earn a fixed salary only, section 23(m) prohibits deductions for most expenditure, losses or allowances that would otherwise be allowable under section 11(a).
Only expenses directly tied to the use of the premises, such as rent, electricity and cleaning, may be considered. Even then, this applies only under very specific conditions, which limits many home office tax claims.
In short, while section 11(a) allows the deduction of qualifying expenses, and section 23(b) adds strict conditions for home office use, section 23(m) disallows most deductions for salaried earners. In practice, even if the general and home-office-specific conditions are met, fixed-salary earners are still barred from deducting most business-related expenses. This includes internet and cell phone costs, accounting fees and stationery.
Professional tip
If you are a fixed-salary earner working from home full-time and wish to claim deductions, ensure that:
- Your employer provides a formal letter confirming remote work.
- You have a dedicated, exclusive workspace.
- More than 50% of your duties are performed in that space.
- Your claim is limited to premises-related expenses.
Even then, SARS may still challenge deductions beyond the narrow exemptions outlined above. Therefore, the taxpayer must prove that the deduction should be allowed to succeed with home office tax claims.
In conclusion
In preparation for a Tax Filing Season, taxpayers must remember that the South African Revenue Service (SARS) applies the rules around home office deductions strictly and conservatively, particularly for salaried employees.
Taxpayers are advised to consult a qualified tax practitioner before submitting any home office-related claims. This approach helps avoid audit risk, disputes and potential penalties while maximising eligible home office tax claims.