working from home SARS

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Working from home – carefully consider any claim for home office expense

SARS advised individual taxpayers to carefully consider any claim for home office expenses before filing their income tax returns.

working from home SARS

Image via Adobe Stock

Individual taxpayers have been advised by the South African Revenue Service (SARS) to carefully consider any claim for home office expenses before filing their income tax returns.

INDIVIDUALS SPENT MORE TIME WORKING FROM HOME

“Understandably, due to the impact of Covid-19, a number of individuals spent more time than usual working from home.”

In considering whether to claim for any related expenses, it is important to note the following:

There have been no changes to the legislation in relation to a “home office”. The legal requirements remain the same as before the Covid-19 pandemic.

In brief this means:

  • A office, appropriately equipped, must have been set up at the place of primary residence;
  • The office must have been used regularly and exclusively for work purposes;
  • 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;
  • Any home office expenses must be linked to employment use and must be verifiable; and
  • Home office expenses must be claimed against source code 4028 in the income tax return.

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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 have an adverse impact on 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.”

WORKING FROM HOME MAY LED TO SAVINGS ON EXPENSES

SARS said in a statement that 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 of the capital gains exclusion, these savings may outweigh the benefit of a claim for home office expenses.”

It added that whilst 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.

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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 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”.

The filing season for individual taxpayers is open now..

SARS said that the filing season will run from July 1 to November 23, and encouraged taxpayers to file online.