July 22, 2020

Home office expenses can be claimed during Covid-19 tax year

By Craig Turton, head of Easy Wealth

COVID-19 has changed the way we do business and the way in which we work. Most of us have been required to work from home during this crisis. The South African Revenue Service (Sars) has allowed us to claim the expenses we have incurred working from home.

It is important to note that the claim will be during the tax period starting 1 March 2020 and ending 28 February 2021. Therefore, you cannot claim in your next tax submission, but rather in the following year’s.

Top tip – start keeping record of these expenses now. Save them in your 2021 tax return folder.

Here are some of the terms and conditions from Sars:

  • You must be a full-time employee; you cannot be registered as a sole proprietor or freelancer (they get to claim these on a normal basis)
  • You need to have worked from home for at least six months of the year
  • You need to have a formal setup at your home. In other words, it cannot be a laptop on your kitchen table
  • You cannot claim expenses that your employer has provided for you

As a salaried employee, what can I claim as expenses?

  • Part of the interest on your bond or part of your rent
  • Municipal rates and taxes
  • Water and electricity
  • Stationery
  • Data costs
  • Wear and tear on office equipment
  • Repairs to your property

What portion or percentage of the above expenses can I claim?

You will need to work out what percentage of your home is being used as your workspace. If, for example, it is 10%, then you would be able to claim 10% of all the above expenses.

Here is an example provided by our good friends at TaxTim:

Leigh-Ann is a graphic designer who works for Company A. Her remuneration consists of a salary only. Her company promotes a flexible work culture and therefore allows Leigh-Ann to work from home three days per week. Leigh-Ann has a separate office at home, fitted out with a computer and printer, which she uses exclusively for her graphic design job. She purchased the computer and printer two years ago for R12,000 and R8,000 respectively, totalling R20,000. Her office is 20 square metres, and the floor space of her entire home (including the office) is 200 square metres.

Assume Sars allows for a three-year depreciation period for the computer and printer. This means an amount of R6,666 (R20,000 ÷ 3) can be claimed per year for three years.

During the tax year she incurs the following expenditure:

  • R120,000 interest on bond
  • R36,000 rates and electricity
  • R36,000 paid to cleaner
  • R5,000 roof repairs
  • R12,000 cell phone expenses

Based on the above, Leigh-Ann does qualify for a home office deduction. The square metreage of her home office (20m2) in relation to her house (200m2) is 20/200 which is 10%.

Therefore Leigh-Ann’s home office deduction for the tax year
= 10% x (R120,000 + R36,000 + R36,000 + R5,000) + R6,666
= R26,366

Since she is not a commission earner, her cell phone expenses are not deductible.

If you own your home and you decide to sell one day, Sars may see the portion you have claimed as expenses as not part of your primary residence. As a primary residence we have a R2,000,000 capital gains tax exclusion. This will reduce by the percentage you have claimed in this expense. In Leigh-Ann’s case, the exclusion will be R2,000,000 – R200,000 (10% of R2,000,000) = R1,800,000

It is always nice when Sars gives us a break, we often don’t thank them. They have recognised that we as taxpayers have incurred extra costs during Covid-19 and have responded with this deduction.

Thank you Sars.