Authors: Darren Britz, Admitted Attorney, and Laurence Mbokwane, Tax Consultant, at Tax Consulting SA
Many South Africans who had to start working from home due to the national coronavirus lockdown imposed on businesses will not yet be able to claim “home office expenses”.
People who are in a traditional employer-employee relationship earning a salaried income have the expectation and general understanding that the employer is responsible for business expenses.
Therefor there is no automatic deduction employees can rely on to claim expenses.
The most important test for claiming expenses is that the person must have spent at least 50% of their time in a tax year working from home.
This means that people will have to continue working from home until at least the end of September for them to be able to claim (six months since lockdown).
The employee will be required to prove to the South African Revenue Service (SARS) that they have created a dedicated area in their home where they conduct their trade.
This is not simply a table in the corner of a room. It must resemble an office when SARS comes knocking.
Only then will they be able to claim expenses such as a portion of the rental or interest on bond payments, electricity costs, and other office expenses such as stationary, airtime and data costs.
There are currently two situations.
The one is where the employee takes it upon himself to incur the costs necessary to continue working from home and the employer does not reimburse his costs.
These employees are seeking some relief through deductions from their taxable income.
The other is that the employer pays an amount upfront for certain expenses.
This has the risk of attracting fringe benefits tax. It becomes a fine line whether the costs were incurred to fund business expenses or if it was used for the employee’s personal benefit.
The ideal position would be through reimbursements. It does not sound fair to the employee, but the better approach would be for them to incur the costs and then to claim it as a reimbursement from the employer.
It will be easier to submit proof (invoices and receipts) that the expense was for business purposes than having received a cash amount paid and having to prove how it was used.
If the employee and employer negotiate an arrangement for the employee to continue working from home indefinitely, it is important to obtain a letter from the employer setting out the new arrangement.
It will also be important to keep detailed records (supporting documentation) of all the expenses that will be claimed.
Abandon the claim
People who have been working from home temporarily and just “made-do” in the short term (using the dining room table as their workspace) should abandon claims for tax deductions. We would not recommend they pursue this route seriously.
However, people who earn more than 50% of their income through commission or qualify as independent contractors remain entitled to claim their businesses expenses as they have been doing before the imposition of the lockdown.
Should you still consider claiming from SARS ensure that you comply to all requirements and have your documentation and office space ready should SARS request the necessary proof.
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