Sars announces key factors to consider when claiming for home office expenses
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The South African Revenue Service (Sars) has announced that it has published an update on its website about home office expenses.
In a statement, Sars said it wanted to provide further clarity for individual taxpayers who may be considering submitting claims for home office expenses in their income tax returns that can now be filed for the 2021 tax year.
According to the Revenue Services, The impact of Covid-19 has made scores of individuals spend more time than usual working from home.
Sars commissioner Edward Kieswetter said: “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 ask taxpayers to consider carefully the long-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."
Sars said if a taxpayer is considering to claim for any home expenses, it was important to note the following:
1. There have been no changes to the legislation about a “home office”. The legal requirements remain the same as before the Covid-19 pandemic. In brief, this means:
1.1. An office, appropriately equipped, must have been set up at the place of primary residence;
1.2. The office must have been used regularly and exclusively for work purposes;
1.3. The office must have been used for more than 50% of the employee’s duties or, if the employee earns more than 50% of their remuneration from commission or other variable payments based on work performance, more than 50% of the employee’s duties must have been performed away from the employer’s office;
1.4. Any home office expenses must be linked to employment use and must be verifiable; and
1.5. Home office expenses must be claimed against source code 4028 in the income tax return.
2. Where the home office is in taxpayer-owned property, taxpayers should note that formally defining part of a primary residence as a home office will most likely hurt a future capital gains determination. The home office area will, on a pro-rated basis, be excluded from the primary residence exclusion of R2 million on disposal of the residence. Careful consideration should, therefore, be given before a claim for home office expenses is made.
“Taxpayers may also find that working from home led to savings on expenses they would otherwise have incurred, like transport, wear and tear on vehicles, and so forth. Taken together with the loss of part of the capital gains exclusion, these savings may outweigh the benefit of a claim for home office expenses,” said Sars.
3. While all claims for home office expenses may be subject to further verification or audit by Sars, it is important to note that there is a high likelihood that a taxpayer who claims home office expenses for the first time will be selected for verification or audit.
Sars said taxpayers who require further assistance may refer to our website at www.sars.gov.za.