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When can you claim tax for working from home?

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With the Covid-19 pandemic having changed the way the world’s workforce operates, rather than being a place where employees congregate every day, offices are more likely to remain corporate hubs where teams meet to connect and innovate.

In June 2021, it was estimated that 50% of South Africa’s workforce was working from home full-time and, as Omicron and new Covid variants develop, it seems the way we work will forever be changed.

Remote and hybrid workforce

Remote working, or work-from-home models, were never a well-planned strategy but rather a haphazard reaction to the global pandemic. However, the reaction to these new work models, in most part, has been well received by both employees and employers. Employees generally feel more motivated and satisfied while organisations have increased productivity, reduced overhead costs, and still managed to positively contribute to employee engagement.

Another key development is the hybrid workforce, with employees splitting their time between their homes and offices. This has become a preferred option in South Africa, which is reflected by global trends that, in one study showing 86% of managers and decision-makers saying they expect employees to work between one and four days at home from 2022.

What you need to know about claiming home office expenses

If you are an employee who works from home and has set aside a room to be occupied for work, you may be allowed to deduct certain expenses incurred in maintaining a home office, which will be calculated on a pro-rata basis.
Tax deductions for home office expenses will only be considered:

• If the room is regularly and exclusively used for your trade or employment and is specifically equipped for that purpose;
• If your remuneration consists only of a salary and similar remuneration, your duties must be mainly performed in this part of the home. In other words, you must perform more than 50% of your duties in your home office; or
• If more than 50% of your remuneration consists of commission or variable payments based on your work performance, more than 50% of those duties must be performed otherwise than in an office provided by your employer.

What constitutes home office expenditure?

Typically, the types of home office expenditure are those that are closely linked to the premises, including:

• Rent or interest on your bond
• Cost of repairs
• Expenses relating to the premises, such as rates and taxes, cleaning costs, and electricity.
• Other typical expenses may qualify for a separate deduction to maintain the home office, such as general wear and tear on items used for trade purposes in the office; office equipment, furniture and fittings, and their repairs; as well as phones, internet, and stationery.

Note that this expenditure is not necessarily deductible but rather reflects the types of expenditure that may typically be incurred when maintaining a home office.

How do I calculate home office expenses?

Generally, expenses relating to the rent or cost of repairs for your premises are determined by the size of the space used for your office. If you qualify for a deduction, the amount is calculated on A/B x total costs, where:

• A = the area in m² of the part specifically equipped and used regularly and exclusively for the qualifying home office.
• B = the total area in m² of the residence, including any outbuildings and the area used for trade in the residence.
• Total costs = the costs incurred that are linked closely to the premises, such as those listed above.*
*Note that only expenses relating to the premises must be apportioned based on floor area (for example, rent, rates and taxes, cleaning). Expenses that are not in connection with the premises (such as wear and tear on equipment and furniture used for trade purposes) do not need to be apportioned based on floor area.

What are the Capital Gains Tax implications if I sell my house used partially for trade?

When a part of your home is used as a home office, that part is considered to “taint” the primary residence exclusion for Capital Gains Tax purposes.

When you sell your home, the overall capital gain or loss is assigned between the tainted and untainted elements. This allocation is done by calculating the portion of your home used for business purposes – as a home office (based on floor area) – and the period that the part was used as a home office. The primary residence exclusion of R2 million can only be set off against the untainted portion of the capital gain or loss. The tainted portion of the capital gain must be fully brought to account.

For advice about claiming tax for your home office, consult an accountant or contact us today.

Source: SARS

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