For most South Africans, a large portion of the 2021 tax year was spent working from home since Level 5 was introduced (lockdown – not load shedding!).
Due to this, many individuals could potentially claim an additional tax deduction in the form of home office expenditure. It is crucial to understand who qualifies for this additional deduction and what can be claimed.
A tax deduction for home office expenditure will only be allowed if all of the following requirements are met:
- The space is a dedicated work area that is only used for work purposes regularly (e.g. a home study).
- You have equipped this space specifically for work.
- Your work is mainly carried out from this space (there must have been communication, preferably written, between the employer and the employee instructing the employee to perform his/her duties at home).
- You have worked from this space for more than six months of the tax year
What can you claim?
While it is tempting to claim everything you think of as a business expense, my advice here is to be cautious. SARS will, in all likelihood, be monitoring these claims very closely, and the onus of proof lies with the taxpayer.
The following expenses may be claimed:
- Rent of your home premises
- Interest on your bond
- Rates and taxes
- Water and electricity
- Security costs
- Cost of repairs to the premises
- Internet (ADSL/Fibre) costs
- Phone costs
- Office equipment
- Wear and tear (on qualifying assets*).
*Allowance assets such as desks, office equipment, computer equipment etc., all have different wear and tear periods (i.e. the number of years over which the value of an asset may be claimed as a tax deduction). Refer to the SARS website for these periods.
What can’t you claim?
Anything that your employer provides to you free of charge, like a work laptop or data, can’t be claimed. You also can’t claim the expense if it has been reimbursed by your employer.
How do you calculate the tax deduction?
The tax deduction is only available for the area of the home that is used for employment purposes. This means that only a pro-rata amount of the allowable expenses may be claimed for tax purposes. An acceptable method is to apply the square meterage of the area of the home used for employment purposes vs the total square meterage of the home.
Expenses that are not linked to the square meterage of the area, such as internet and office equipment, should be claimed to the extent that the expense relates to carrying out your work-related duties.
How do you claim the tax deduction?
Once the tax season opens, it is crucial to remember that the automated assessment SARS provides will not list these claims. The taxpayer will be required to add these to their tax return themselves. This can be done by including a tax deduction for home office expenses under the “Other deductions” section of the ITR12 (tax return for an individual).
What else should you consider?
It should be noted that should you claim a tax deduction for home office expenses that this will have to be factored into your capital gains tax calculation when you sell your home.
Whatever portion of the house you have claimed for as a home office deduction will be excluded from your R2 million capital gains tax exemption.
Which documents may SARS request?
It would be beneficial to have the following documents on hand should you be required to provide support to SARS:
- Evidence to substantiate how the area was specifically equipped and used for employment purposes exclusively (such as a photo of the room).
- Written communication between the employer and the employee instructing the employee to perform his/her duties at home.
- Confirmation of the date when you returned to the office.
- Proof of expenditure incurred (invoices, agreements, statements, bank statements etc.).
- A floor plan of the home with square meterage reflected, and the home office area indicated.
- A detailed spreadsheet indicating the expenses you wish to claim, a calculation of the square meterage of the home office vs the entire home and how this ratio has been applied to the expenses to calculate the deduction.
Although many of us have returned to the office, we are likely to continue to work from both the office and home in the foreseeable future. With this in mind, it is important to equip ourselves with the knowledge about what can and can’t be claimed.