At SimplePay we love going the extra mile for our customers and their employees. Normally this involves making your payroll obligations a breeze, but sometimes there are aspects of income tax law that we like to highlight as they can benefit both you and your employees!
As you will be all too aware, COVID-19 triggered an exodus out of the office with many finding themselves Working From Home (WFH) for extended periods of time. With the notable exception of one’s pets, it’s fair to say that most of us have found WFH to be anything but smooth sailing. Video meetings, choppy internet connection, the forbidden L word (thanks Eskom)… It hasn’t always been a walk in the park.
There is one positive result of this though and it comes in the form of a tax deduction for certain home office expenses. Provided you meet the requirements laid out below, the various costs that you’ve incurred running a home office could be deducted when you submit your individual tax return (ITR12) next month.
(The below is intended purely for informational purposes to highlight the existence of this deduction – for any queries around eligibility, claiming etc, please contact SARS directly).
What are the qualification requirements?
There are four key elements to be eligible to claim home office expenses:
- The part of your home connected to the claim must be occupied for the purpose of trade.
Put simply, you need to have an allocated area in your home from which you work.
- The part of your home needs to be specifically equipped and regularly and exclusively used for the purpose of trade.
“Specifically equipped” simply means that you have the equipment needed for you to carry out your role. Clearly this is subjective; the equipment required by a software developer is not the same as that required by a carpenter. Practically this could mean as little as a laptop, chair, table and internet connection.
“Regularly” is again subjective, but a SARS interpretation note highlights that there needs to be a certain frequency of working that once a week is unlikely to meet.
“Exclusively” indicates that the part of your home used to work must be exclusively used for that purpose. As soon as there is mixed business and private use, this requirement isn’t met. There is no hard and fast rule on exclusive use currently, so you will need to make a judgement call on whether you’ve satisfied this requirement. If you’re at all unsure, it’s always best to contact SARS directly – their call centre is very helpful!
- You need to work at home for at least 6 months of the tax year.
For salary-based employees to claim, at least 50% of their working time must be spent working from home. So, if you moved to remote working after the first lockdown in March 2020 and didn’t return to the office before October 2020 you’ve most likely met this requirement!
- Your employer must have granted you permission to work from home.
This could be as simple as a letter from your employer confirming that they required you to work from home and explaining to what extent.
What might you be able to claim?
Once you qualify, some of the key items you might be able to claim expenses for are:
- A portion of the cost of your rent / your bond’s interest*
- Rates and taxes for the property*
- Repair / renovation costs*
- Maintenance costs for the home office e.g. cleaning
- Wear and tear allowances on stationery and office equipment used for the purpose of trade.
*You can claim the cost of rent / interest on your bond, repair / renovation costs and rates and taxes in proportion with the percentage of your home occupied as a home office.
SARS has stated that estimates will not be permitted and you must be in a position to prove the floor area of both your premises and the home office, if requested. They have not elaborated on what they will require as evidence, but this clearly makes it very important to be as precise as possible for the proportion you claim.
FYI: employees who earn more than 50% of their gross income through commission can deduct further expenses, but for simplicity’s sake this information has not been included. If you would like more information on this, please call SARS or visit their webpage.
Ok I’m satisfied I qualify, how can I claim?
Individual filing season opened on 1 July 2021 and runs until 23 November 2021. As long as your employer has completed their employer filing return, your ITR12 should be pre-populated with the relevant information from the IRP5.
You can claim your home office expenses on your individual tax return (ITR12). In claiming the expenses you will need to make sure:
- You meet the requirements laid out above.
- You have recorded the expenses that you’ve incurred by running your home office (there is no prescribed format, you just need to provide the information in a clear way, like a spreadsheet).
- You have retained bills and receipts to evidence your expenditure, in case this is requested by SARS (these should be retained for 5 years).
When completing your individual ITR12 you simply need to claim the amount under the deductions sections and upload your relevant supporting documents when prompted.
Once you’ve done this, you can file your return and that’s it! It’s then over to SARS to review your return and pay across the amounts due to you. As always, if you’re at all unsure about whether you qualify, how to complete the forms etc, please get in touch with the SARS call centre for guidance.
We hope that this information has proved useful to you. As this information is relevant to a larger than normal proportion of people this filing season, we encourage you to share this post with your employees, colleagues, friends and family, so that everyone can benefit!
If you have any questions on the above information you can contact SARS on 0800 00 7277.
Equally, if you are not yet a client of SimplePay but would like to be, why not check out our website? Or, better yet, try out our service for free with our 30-day trial, get acquainted with our user-friendly service by reading our getting started page, or take our free online course.
Keep well and stay safe