Consider before claiming for home office - SARS

Posted in Latest News

Klerksdorp Midweek, Klerksdorp - Taxpayers who may be considering submitting claims for home office expenses in this year’s income tax return must consider the longer term implication of this claim. SARS Commissioner Edward Kieswetter recommended that it is better to “wait and establish a more sustainable rhythm before making the decision to claim”.

From a press statement it is clear that SARS will concentrate on verifying claims for home office expenses even warning that there is “a high likelihood that a taxpayer who claims home office expenses for the first time will be selected for audit”.

Due to the pandemic, a number of individual tax payers spent more time than usual working from home. SARS has recently published an update on its website in relation to home office expenses. 

In considering whether to claim for any related expenses, it is important to note the following: There have been no changes to the legislation in relation to a “home office”. The legal requirements remain the same as before the Covid-19 pandemic.

In brief this means:
* An office, appropriately equipped, must have been set up at the place of primary residence;
* The office must have been used regularly and exclusively for work purposes;
* The office must have been used for more than 50% of the employee’s duties or, if the employee earns more than 50% of their remuneration from commission or other variable payments based on work performance, more than 50% of the employee’s duties must have been performed away from the employer’s office;
* Any home office expenses must be linked to employment use and must be verifiable; and
* Home office expenses must be claimed against source code 4028 in the income tax return. 
* Where the home office is in taxpayer owned property, taxpayers should note that formally defining part of a primary residence as a home office will most likely have an adverse impact on a future capital gains determination.

The home office area will, on a pro-rated basis, be excluded from the primary residence exclusion of R2 million on disposal of the residence.

Careful consideration should, therefore, be given before a claim for home office expenses is made.

Taxpayers may also find that working from home led to savings on expenses they would otherwise have incurred, like transport, wear and tear on vehicles and so forth.

Taken together with the loss of part of the capital gains exclusion, these savings may outweigh the benefit of a claim for home office expenses. 
Taxpayers who require further assistance in this regard, may refer to the website at www.sars.gov.za

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