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