It has become more and more prevalent that remote working is the new norm and employees are forced to create a conducive space to enhance productivity. What working from home effectively looks like is that, one needs to ensure that there is a designated work space with the right technology, ways of dealing with children, pets and other potential disruptions; and a schedule that allows for social contact and stimulation that ordinarily comes from being in a workspace with others. It is critical to have a functional workspace even whilst working from home – having a separate working area away from your personal space.
SARS confirmed that full time employees who work from home will be able to claim home office expenses during the current COVID-19 global pandemic. Their (SARS) intention is to give an honest taxpayer a seamless and pleasant experience but for the dishonest taxpayer, it would be difficult and costly if they do not comply. By August, 4th 2021, SARS had received 10 000 claims from taxpayers for the deduction of home office expenses. Of those claims, 8500 were deferred for further verification or an audit and 70% of them were denied due to non-compliance. You have to be a full time employee that works from home and you must have incurred losses and expenses that are linked to you earning an income. These expenses need to be directly connected to the business operation. If for example you require data to do your work, that is a direct cost related to you earning an income.
Below are supporting documents that need to be submitted in order for your claim to be processed:
- Employees working from home for at least 6 months or longer
- There must be an office space exclusively designated for performing work tasks (with stationery and necessary equipment),
- Your home office must at least be 20 square meters
- There needs to be a letter from your company HR personnel stating that you work from home
- You need to provide receipts or proof of payment for all expenses incurred
- You may need to provide your homeowner documents or lease agreement.
Should you incur costs at the instruction of your employer, then you need to account for it to the employer to prove that those expenses have only been used for the purpose that is part of your job description or what you are required to do. In terms of paying part of the mortgage or interest, SARS will firstly consider your municipal rates and taxes and then take into account the floor space of your home office, compared to the total floor area of your house.
If all requirements are met, then taxpayers can claim the following:
- Data usage
- Water and electricity
- Rent
- Interest paid on the bond
- Repairs made on the premises
- Wear and tear of office equipment
SARS Commissioner, Edward Kieswetter says: “The need for many employees to work remotely has been necessitated by the Covid-19 pandemic in an unprecedented manner. We understand that many employers, and employees alike, are grappling with establishing a new normal. We would simply ask taxpayers to consider carefully the longer term implication of defining an area in their primary residence as a home office for tax purposes. It may be more prudent to wait and establish a more sustainable rhythm before making the decision”.
Claiming home office expenses as a homeowner may result in extra Capital Gains Tax (CGT) when you sell. Note that for primary residences, the first R2 million of any capital gain on a sale is not taxed. Therefore, careful consideration need to be made before a claim is made for home office. Taxpayers may also see that they save quite a bit whilst working from home, i.e transport or fuel costs, wear and tear on vehicles, etc. Considering the potential loss on capital gains, these savings may outweigh the benefit of a claim for home office expenses. First time claims usually undergo audits and verification by SARS.
