The home office and tax purposes in South Africa

-Marty Santana.

As the Covid pandemic drove companies to encourage working from home, our worlds of work have radically changed. As millions of South Africans have adapted to working in a home office, there should be some account of the additional costs incurred by taxpayers for working from home.

Taxpayers can claim a tax deduction if they have worked from home for more than half of their total working hours or for more than six months during the tax year that started in March 2021. Taxpayers must meet the minimum requirements to claim this expense on the income tax return:

·        You have spent more than half of your total working hours working from your home office.

·        You have a letter from your employer that states that you can work from home and confirms the percentage of time you spent there.

·        You have an area of your home exclusively used and set up for work. Your study cannot just be a desk in a room used for other purposes, it must be exclusively used as a study.

Once the taxpayer meets these requirements, they can claim rent or interest on their bond, repairs to the premises, rates and taxes, water and electricity, cleaning, wear and tear of office equipment and all other expenses relating to your house and based on the percentage of area. It is important to note that the abovementioned expenses are only permitted to the extent of the physical area of the study or home workspace. So for example, should the home office or study take up an area of 10 square metres and the house in total is 100 square metres, the taxpayer will only be able to claim 10% of all other costs for the home office.

Wear and tear expenses are not based on the percentage of area.  If the office equipment is more than 50% used for business purposes,  then the full cost can be claimed and is not apportioned.

SARS has stated that internet costs are an expense for which the company must re-imburse the employee, and thus will not be taxable in the hands of the employee. 

It is important to note that you will need to update proof of all expenses paid when uploading documents once the return is submitted, so ensure that you have all invoices before making a claim. During the 2021 tax year SARS also required a photograph of the study as well as a letter from the employer confirming that employees where required to work from home during the tax year. This will continue to be a requirement.

To determine your home office deduction, workers should calculate the total square meterage of their home office in relation to the total square meterage of your home and convert this to a percentage.

This percentage is then applied to the home office expenditure to calculate the portion that is deductible. These claims will not be listed on the SARS auto assessment and therefore it is important to ensure that the auto assessment is not accepted and that the taxpayer adds these to the tax return themselves.

Do not accept the auto assessment that is sent out by SARS.

One of the questions on the wizard when preparing the income tax return is the following:

Did you receive any other income (excluding amounts received/accrued as a beneficiary of a trust(s), or deemed to have accrued in terms of s7) and/or incur any other allowable expenses not addressed above?

This must be marked as Yes.

This will bring up an additional page where the expense can be claimed.

Below is an example of expenditure you can claim.

Do you own or rent your property? Rent  Yes/No Own Yes/No

Rental expenditure for renters

Rental

Water and Electricity

Cleaning

Repairs and Maintenance

Security = Total household expenditure

Square meterage of study/

Square meterage of total property = % of expenditure claimable for study

Claim in full the cost Wear and Tear of Office Equipment.

Please note that any equipment bought during the year for less than R7 000 can be claimed in full in year of purchase.

Insurance on household goods can be claimed in the percentage of cost of office equipment over total household goods insured.

Property owned

Bond Interest (not bond repayment which includes capital portion repayment)

Water and electricity

Cleaning

Repairs and Maintenance

Levy

Insurance on Building = Total household expenditure

Square meterage of study/

Square meterage of total property = % of expenditure claimable for study

Claim in full the cost of Wear and Tear of Office Equipment.

Please note that any equipment bought during the year for less than R7 000 can be claimed in full in year of purchase.

Insurance on household goods can be claimed in the percentage of cost of office equipment over total household goods insured.

 Wear and Tear Schedule Rates

Office equipment – electronic                                         33.3%

Computer software (must relate to business use)        50.00%

Furniture and Fittings                                                      16.67%

Please remember that wear and tear is calculated on the original cost of the asset in proportion to the months in which it is used during the tax year.

Example: Computer purchased in August 2019

Cost                                                                                   

R 20 000,00

Wear and Tear August 2019 to 28 February 2020       

For 7 months                                                                     R 3 885,00

(during this tax year not claimable as worker did not work at home)

Net Book value on the 28 February 2020                      R 16 115,00

Wear and Tear 12 months                                                R 6 660,00

(based on 33.3% of original cost)

Net Book value 28 February 2021                                  R 9 455,00

Wear and Tear 12 months                                                R 6 660,00

Net Book Value 28 February 2022                                 R 2 795,00

Wear and Tear 12 months limited to book value             R 2 795,00

Net book value 28 February 2023                                   R     Nil

Bear in mind that if the computer is sold that some of the wear and tear claimed is then recoupable by SARS in the future.

Please note that SARS may ask the employer to confirm that this was part of the employment contract as part of their queries.  However, section 23m does not require that a home study is part of your employment contract, it only indicates that the home office needs to have been used more than 50% of the time for business purposes. This claim for a study is specific to employees, any person working as a self employed contractor has a right to claim this expense as there normal place of employment is either an office owned by the contractor or a home office.

Published: 02 August 2021