The Covid pandemic has significantly changed the working landscape, with work from home becoming a reality for many of us. In most cases this went from being a luxury available only to the most senior staff and sales persons to a legal requirement for all employees.
The historic treatment of home office expenses has been, and is, very restricted. This tax treatment was predicated on the idea that the majority of people who would be attempting to claim these expenses would be in a position of power and, therefore, able to abuse the provisions. As a result, the law as it currently stands is not the way we would like it to be, nor what most of us would consider fair.
The basic requirements for employees are as follows:
From my point of view the real concern here is the onus of proof. How are you going to demonstrate exclusive use? Having invoices showing costs is not enough. This means that the unfortunate reality is that for many people the actual deduction is going to be “very little”.
A further consideration is that by claiming the home office expenses, you are no longer using your home primarily for residential purposes. This means that when you sell the home, the primary residence exclusion must be reduced for the portion used for business purposes. When considered with the restrictions discussed above, it may cost you more to claim the expense.
Budget 2021 did say that the law surrounding home office expenses would be reviewed – however, until those changes are promulgated, we will have to deal with the law as is.
If you would any further information, the following resources are available:
The historic treatment of home office expenses has been, and is, very restricted. This tax treatment was predicated on the idea that the majority of people who would be attempting to claim these expenses would be in a position of power and, therefore, able to abuse the provisions. As a result, the law as it currently stands is not the way we would like it to be, nor what most of us would consider fair.
The basic requirements for employees are as follows:
- If you earn mainly (50% or more) commission, then you must be working mainly away from your employer’s office.
- If you are not a commission earner, then you must be working mainly from your home office.
- Your office must be completely separate from the rest of your normal living space.
- It cannot be used for anything else – even letting the kids do their homework in the office on the odd occasion is enough to kick it out.
- Any other facilities charged for would need to be exclusive, e.g. data.
From my point of view the real concern here is the onus of proof. How are you going to demonstrate exclusive use? Having invoices showing costs is not enough. This means that the unfortunate reality is that for many people the actual deduction is going to be “very little”.
A further consideration is that by claiming the home office expenses, you are no longer using your home primarily for residential purposes. This means that when you sell the home, the primary residence exclusion must be reduced for the portion used for business purposes. When considered with the restrictions discussed above, it may cost you more to claim the expense.
Budget 2021 did say that the law surrounding home office expenses would be reviewed – however, until those changes are promulgated, we will have to deal with the law as is.
If you would any further information, the following resources are available:
- Interpretation Note 28
- SARS page on home office expenses: Click here
- SARS webinar on Home Office expenses: Click here
Enrol in the course: Filing season '21: Successfully claiming home office expenses
Copyright © CPD Campus (Pty) Ltd 2024