Do the work-from-home tax benefits apply to you?

by | Mar 8, 2021 | Advisory Services

More South Africans are working from home than ever before. Read on to find out if the tax benefits apply to you…

The hard lockdown imposed last year saw most companies implement a “work from home” policy. The past 12 months have been testing for many, not least those balancing work and home-schooling. While there is not much, we at Sentinel can do to assist with the juggling act, we can take you through the potential tax benefits (and pitfalls) of working from home.

Please note that this article only deals with salaried employees, more generous allowances apply to commission earners and independent contractors.

As a salaried employee, you can claim certain expenses incurred on home office, provided that the requirements set out in section 11, Section 23(b) and section 23m of the Income Tax Act are met.

How do I qualify?

Here is a brief explanation of the conditions that salaried employees need to meet to claim home office expenses.

  • The home office must be occupied only for trade purposes.
  • The home office must be specifically equipped for trade purposes.

You cannot use your dining room or lounge as your office, you need a room that is equipped exclusively for trade purposes.

  • The office must be regularly and exclusively used for purposes of trade.
  • The duties must be performed mainly in that office.

More than 50% of the duties must have been performed in that office. This means that you must have worked in that office for more than 6 months in the year of assessment.

What expenses can I claim?

If the above requirements are met, you can claim the following expenses that have been incurred in your home office.

  • Interest on bond
  • Cost of repairs to the premises.
  • Phones, stationery, rates and taxes
  • Cleaning, office equipment
  • Wear and tear on equipment used for trade purposes e.g laptop.
  • Any other expenses in connection with the premises

It’s important to note that the above expenses can’t be claimed on the square footage of your residence, but only the portion of the residence used for trading purposes. For instance, if your office comprises 10% of your residence, you can only claim 10% of the interest on the bond.

As a Salaried employee, there are also some expenses that you’re not allowed to claim, including data cost and travelling expenses, For the full list of prohibited expenses please refer to Section 23(m) of the Income Tax Act.

 Before you get too excited

You know what they say – if it sounds too good to be true, then it probably is. The downside of claiming home office expenses is that it impacts your capital gain in the future. Using part of your primary residence as an office will have a negative impact when you decide to sell the house.

As you may know, there is an R2 million CGT exemption on the sale of your primary residence. But choosing to use part of your home as an office reduces this exemption. If, for example, the office takes up 15% of the house’s footprint, the exclusion will be changed to 85% of R2 million – or R1.7 million.

The bottom line

The first step is to speak to your adviser to ascertain whether claiming work-from-home expenses makes sense for you. If you decide to claim home office expenses, you will need to prove to SARS that you meet the above-mentioned requirements. It goes without saying that you should disclose only qualifying expenses on your tax return (ITR12) under deductions.

We would strongly recommend using professional advisors to assist you in claiming these expenses. Sentinel can attend to this in the most efficient way. Who knows…It might be the lockdown silver you were waiting for?

Written by:

Khathutshelo Lugisani – Tax Advisor (SA)

BCom accounting, BCom (Hons) in Taxation

Registered tax practitioner