When lockdown was announced in March, we, like many of our clients, were forced to work from home. While restrictions have eased, many South Africans will continue to work from home for the foreseeable future.
Under South African tax rules, the cost of working from home is an expense you can offset against the money you earn if you are an independent contractor, a commission earner or a full-time employee.
Those who qualify can claim all their expenses from working from home, including: airtime, data costs, electricity and water, wear and tear on office equipment, stationery and even a portion of their rent or mortgage payments. The calculation of square metre of home office area, relative to the total residence, with the same ratio applied to expenses such as rates and interest, will need to be submitted when claiming expenses.
The most crucial criteria to qualify claiming expenses is that you had to have spent at least 50% of the Tax Year working from home. This means that you would have worked at home until at least the end of September, six months since lockdown began. In that case, employees who cover their costs can claim these back, come tax time.
There is a critical aspect of claiming these costs against tax; you need to have a dedicated workspace and must be able to prove that it exists. This is not simply a table in the corner of a room; you need to prove that your workspace at home meets specific criteria for it to be classified as a home office. For example, you need to prove that the space is a dedicated work area that is used regularly, only for work purposes, and that work-related tasks are primarily carried out from this space. You will also need to have equipped the space specifically for work-related duties.
People who have been working from home temporarily, and just “made do” in the short term using the dining room table as their workspace should abandon claims for tax deductions. A last word of caution, should you claim a home office expense this could impact your primary residence capital gains tax exemption.
From my many years of experience with SARS, I am advising that you keep track of all expenses and days worked at home, and that you have supporting documents if, and when, SARS asks for these.
Many of my clients have been sending me pictures of their home offices to keep on file and to load up to SARS when completing the February 2021 returns; the image left is such an example of a very proactive taxpayer.
Please note that this does not take into account your specific financial circumstances, any potential capital gains tax or any calculations required prior to applying for any deductions, and is for information purposes only. Should you be interested in making use of any deductions mentioned in this article, please contact your RetiremeantTM Specialist or Tax Advisor.
Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)