Do you work from home? How to claim tax back from the SAID during the lockdown
Amid the global pandemic, the South African Revenue Service (SAID) has recently announced that employees who work from home can claim expenses related to their home office and tax deductions.
This comes as several major South African companies have informed their employees that they will be working from home until at least August 2021 due to the worldwide coronavirus pandemic.
Working from home not only benefits companies in terms of cost savings such as water and electricity expenses or rent, but it also leads to improved productivity and employee satisfaction.
Who can enjoy the tax benefit?
If you are an independent contractor, someone earning commissions, or a full-time employee working from home, you may be eligible to potentially claim tax back on your office expenses if you have worked from there for extended periods.
According to the Income Tax Act, you must be able to prove that your workspace at home meets the following requirements to be considered a ‘home office’:
1. You must have a dedicated workspace and be able to prove its existence.
2. Spend more than 50% of total working hours at the home office.
3. You have worked from this space for at least six months of the 2021 tax year.
For example, if you are an employee who worked your regular office hours for a sole employer during the tax year from March 1, 2020, to February 28, 2021, you would qualify if you worked at least half of the tax year at your home office.
What expenses can you claim?
If you meet the above criteria, you can deduct the following:
1. Office supplies and data costs.
2. Cleaning services.
3. Repairs and maintenance.
4. Depreciation of office equipment.
5. A portion of your mortgage interest or a portion of your home rent, as well as municipal rates and taxes, such as water and electricity.
To calculate your expenses related to your home, rent, rates, and taxes, the total floor area of your home office is compared to the total floor area of your entire home. For example, if your home office is 15 square meters, and your house is 150 square meters, your home office is responsible for 10% of the total floor area of your home. Therefore, you will be allowed to deduct only 10% of the relevant expenses, such as rates and taxes or interest payable on your mortgage.
If your employer reimburses you for your home-related expenses, such costs will not be taxable.
How can you claim?
You must keep accurate records of your expenses, as the South African Revenue Service (SAID) may request proof of any deductions claimed. The days you worked from home should also be documented to prove that more than 50% of total working hours were spent at home.
What are the drawbacks?
It should also be noted that claiming a tax deduction for a home office can have a negative impact on the calculation of capital gains tax if you plan to sell your property in the future.
According to the South African Revenue Service (SAID), the first R2 million of a primary residence is not subject to capital gains tax. However, if an individual indicates to the SAID that a portion of the property is not a residence but an income-generating office, that portion may be excluded from capital gains tax.
Therefore, if an individual claims 10% of their home’s floor area as an office, then 10% of the eventual selling price may be liable for capital gains tax. The inclusion rate for capital gains tax for individuals is 40% (meaning your capital gains are included in your income tax calculation at a 40% inclusion rate). However, the South African Revenue Service (SAID) has indicated that the capital gains tax calculation should take into account the duration during which an individual used their home office.
If you want to claim tax back from the SAID, we can help. Contact our team of experts by sending us an email at info@crs-group.co.za or by calling us at 079 495 5146.