The trend towards working from home and at home is expected to gain massive ground in the wake of the Covid19 crisis and will make the “home office” a feature of many more homes, big and small.
“Increasing urbanisation and traffic congestion has already been driving the so-called Fourth Industrial Revolution, with rising numbers of consumers and employees using the internet to work and buy online and so avoid the stress, risks and loss of time and productivity involved in travelling to offices and shopping centres," says Gerhard Kotzé, MD of the RealNet estate agency group.
“But now we believe remote working will very rapidly become the norm for huge numbers of salaried as well as self-employed individuals, who have perforce learnt just how much it is possible to achieve with a smartphone, laptop and high-speed internet connection.”
'Home office setup is crucial'
If you do have a home office, it needs to be set up correctly to get the most out of it in terms of both productivity and tax savings.
“It could be the study, a spare bedroom or a converted garage, but as many have found, you should be able to close the door when working so that you don’t get distracted by other people in your household watching TV, doing chores or cooking, for example. You should also discourage your children from using it as a homework or play space during your working hours."
And while there are many things to consider when setting up this home office, on the tax front having a home office, allows you to claim a tax deduction from SARS.
"If you are a full-time employee who spends more than half your working hours in your home office, a commission-earner whose employer does not provide you with an office, or a small business owner or freelancer who always works from home, you could be eligible," says Kotze.
“To claim a deduction, you will need to have a specific part of your home which is used exclusively as your office and then calculate the square meterage of that space as a percentage of the total area of your home.
“You need to check with your accountant or tax-practitioner for specifics, but generally, salaried employees are allowed to deduct from their income this percentage of the total cost of anything relating to the whole property, including rent or interest on a bond; any repairs to the premises; cleaning and maintenance costs; rates and taxes and wear and tear.
“Commission-earners can also deduct the same percentage of all their related business expenses, including telephone charges, stationery purchases, repairs to office equipment and courier services, for example, while sole proprietors and freelancers can deduct all their business expenses.”
Does working from home due to Coronavirus Covid-19 apply?
We asked Bass Gordon Tax Manager Petrus Erasmus if this claim would apply for the lockdown period.
"SARS does allow full time employees a deduction of home office expenses if, the taxpayer’s duties must be performed mainly (more than 50%) in that part of the private premises occupied for purposes of trade, as referred to in Section 23(b) of the Income Tax Act."
"From practical experience SARS determines “mainly” as the portion (time period) in relation to the tax year. Therefore, SARS would probably require proof that the taxpayers’ duties are performed mainly at home - such as a letter from his/her employer.
"Should this person have an office/desk area available for him to work at the employer’s office SARS would probably not accede to the claim."
Erasmus says while it is worth keeping in mind, depending on what the future holds, he sees the current situation as exceptional circumstances, and it "remains to be seen if SARS will adjust their stance", as well as the duration for which employees would now be required to work from home.
"This could depend on the lockdown period and how long this will continue. If it is for only the 21 days (current lockdown), the proportionate amount of expenses claimable would be very minimal. However how longer the time period of lockdown, the higher the potential claim."
"Even though employees are working from home, their employer still has an office available for them. The mere fact that it is not used does not mean that SARS will allow the home office claims".
Vat claims for home offices can also get complicated
Home-based businesses that are registered for VAT, can also claim VAT input credits on the costs of maintaining the premises in which that business is housed, advices Kotzé.
“But you should be careful not to claim a VAT input credit on the cost of any additions or alterations you make to your property to accommodate a home office or home business, the reason being that if you claim a credit for building work done to add an office, for example, or to convert the outbuildings, the Receiver will expect you to include VAT in the price of the whole property when the time comes to sell it.
“And that means that unless you could then sell your property for considerably more than the market average in your area, you would probably lose out on 15% of your sale proceeds which would be going straight to SARS – and would no doubt be a much bigger amount than your original VAT credit," adds Kotze.
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