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September 21, 2021

TAX RETURNS AND THE FILING SEASON…

It is that time of year again where we edge closer to the efiling deadline date for individual taxpayers tax return submissions. Now the question on everyone’s mind is…

“Working from home, do I qualify for any home expense deductions”?

No need to worry or stress out, we will be detailing below all of the requirements that you will need to comply with as well as what to do to claim these expenses…

Due to the continuous strain of the covid-19 pandemic, many individuals have either chosen to work from home or were allowed to work from home by their employers for the safety of everyone. The question then arises, can you claim any expenses because of these new working conditions?

The South African Revenue Services (SARS) does allow full-time employees to claim home-office expenses, however, that employee will have to meet certain requirements from SARS to claim these home office expenses. These requirements will be dealt with below (which are according to SARS):

1. When will I be able to claim home office expenses? If you are an employee who works from home and has set aside a room to be occupied for the purpose of “trade”, (employment, you may be allowed to deduct certain home office expenses for tax purposes calculated on a pro-rata basis.  Provided that you meet the requirements as set out in the Income Tax Act (ITA), section 11(a) read in conjunction with sections 23(b) and 23(m). See below for more information on section 23 (b).

2. What are the requirements for claiming home office expenses?

Section 23(b) of the ITA states that a tax deduction for home office expenses is only allowed:

  • If the room is regularly and exclusively used for the purposes of the taxpayer’s trade e.g. employment and is specifically equipped for that purpose. The home office must be set up solely for the purpose of working.
  • If the employee’s remuneration is only salary, the duties are mainly performed in this part of the home. It therefore means you perform more than 50% of your duties in your home office.
  • Where more than 50% of your remuneration consist of commission or variable payments based on your work performance and more than 50% of those duties are performed outside of an office provided by your employer.

3. What constitutes home office expenditure?

Typically, the type of home office expenditure referred to in section 23(b), namely:

  • rentals;
  • cost of repairs to the premises; and
  • Expenses in connection with the premises. (eg. utilities)

In addition to these expenses, other typical home office expenditure that may qualify for deduction in terms of section 23(m) include:

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

4. How do I calculate home office expenses?

The tax deduction is calculated for the area / part of the home utilised for trade e.g. employment purposes. Home office expenses relating to the premises are calculated on a pro-rated basis (square meters of the area you are using of the home office versus total square meters of your home).

5. What is the method of calculating home office expenses?

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.) Expenses that do not relate to the premises (such as wear and tear on equipment and furniture) do not need to be apportioned based on floor area.

6. Where will I claim home office expenses on my Income Tax Return (ITR12)?

Should you qualify for a deduction in respect of a home office, then enter the amount calculated next to the source code 4028 (Home Office Expenses) in the “Other Deduction” section on your Income Tax Return.

7. I want to complete the home office expenses but it does not reflect on the form wizard questionnaire?

When completing the form wizard on the Income Tax return (ITR12), do the following:

  • answer the question “Did you incur any expenditure that you wish to claim as a deduction that was not addressed by the previous questions?”
  • (Select ‘Y’ or ‘N’). If yes, the section for ‘Other Deductions’ will be added to the return.

To see if you qualify to claim home office expenses, follow this link to SARS… https://www.sars.gov.za/types-of-tax/personal-income-tax/tax-season/home-office-expenses-questionnaire/

For dates on the submission deadlines, please follow this link to SARS… https://www.sars.gov.za/latest-news/filing-season-2021-dates/

For further guidance on the above matters or if you require specific tax related services, you can give us a call or email and we will make every effort to assist you with your requirements.

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