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Concerns about narrow interpretation for home office deductions

Very few employees will be able to claim expenses.
Not many taxpayers have the luxury of maintaining a home office that is used exclusively by one person. Image: Chris Ratcliffe/Bloomberg

The South African Revenue Service (Sars) has issued its draft interpretation note on what taxpayers who are “in employment or holding an office” can deduct for home office expenses.

In the 17-page note it gives numerous examples of when expenses will not be permitted.

In response, the South African Institute of Taxation (Sait) says a large percentage of employees who were required to work from home during 2020 will be unable to claim a deduction for their expenses.

“We are of the view that the draft interpretation note does not adequately address the tax implications resulting from the increase in home office use due to the current, ongoing Covid-19 pandemic,” says Keitumetse Sesana, tax technical specialist at Sait.

Read: Rules about working from home need attention

Sars’s interpretation does not align with National Treasury’s intention expressed in the February Budget Review, the institute adds. Treasury indicated that it would review the current travel and home office allowances to investigate their “efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives”.

Exclusive use

Sait is concerned about Sars’s interpretation of what constitutes regular, and particularly “exclusive use”, of the home office. In one of the examples an employee who works from home on a permanent basis will not be able to claim his expenses since he conducts his work from the dining room table.

Sait says many taxpayers do not have the luxury of maintaining a home office that is exclusively used by one member of the household for purposes of that individual’s trade.

If a home office is available, and more than one member of a household is required to work from home, household members will often share the available space.

Sars even provides an example that where the children use the home office as a playroom in the afternoons or over weekends the taxpayer cannot claim home office deductions since it is not “exclusively” used for the taxpayer’s trade.

“It is only in exceptional circumstances that each member of a household working from home will have a dedicated home office exclusively available to them,” says Sesana.

The effect is likely to be that only the elite group of taxpayers – those who are in a position to establish a home office that is regularly and exclusively used for purposes of their trade – will benefit.

“In the case of the majority of taxpayers, where a home office is available, this will generally be shared by all members of the household at some stage, thus falling short of the exclusivity requirement,” says Sesana.

Specially equipped

According to Sars it is a requirement that the home office be specifically equipped for purposes of the taxpayer who is claiming the deduction’s trade, and that it be exclusively used for such purposes.

Sars therefore argues that if spouses share the home office space, it would mean that the home office space used by the one spouse would not have been specifically equipped solely for their trade, but also for that of the other spouse.

In addition, since both are sharing the home office space, it cannot be said to have been occupied exclusively for one person’s trade, therefore neither spouse can claim a deduction for home office expenditure.

Read: Been working from home? Read this …

Sesana says the interpretation set out in the note gives the impression that government is discouraging taxpayers from claiming a deduction in respect of home office expenses.

“As currently drafted, Sars’s interpretation of the legislation is unlikely to recognise the expenses of those who are struggling to make ends meet.”

Sait suggests that the taxman view a taxpayer who works mainly from home to be using the home office regularly and exclusively for purposes of trade while they are actually working in the home office during office hours.

This will allow limited private use of the home office by other members of the household, after hours or over weekends.

Sait also suggests that Sars permit spouses or partners sharing a home office to each claim a percentage of the allowable expenditure incurred in connection with the premises, assuming that the home office is specifically equipped for the purpose of each taxpayer’s trade.

Need for user-friendliness

Given that the majority of taxpayers – whether they earn a salary or commission – incur additional costs over and above property-related expenses because of their working from home arrangement, Sait recommends that the draft note include and allow for a more user-friendly manner of dealing with expenses such as phone costs (including the monthly charges), stationery, furniture, and computer and communication equipment.

“We recommend that Sars consider an interpretation of the legislation that will accommodate the deduction of these costs in these unprecedented times, as it appears that the present working from home scenario will continue to be the norm for the foreseeable future,” says Sesana.

Read: Working from home: Employees get little tax relief

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Sars will dream up every interpretation possible to get more revenue and less deductions !!

It is their mission !!

Not a huge deduction though, is it. Stationery, furniture, and computer and communication equipment – not normally an exciting or significant expense.

would very interesting to find out if any of the so-called home working employees of sars received any extra allowance / fringe benefit in what ever form it might have been, for the utilization of their private home space to do sars work – for what is/was worth. Did sars employees accept any temporary reduction in their salary due to covert 19’s economical disaster as it happened in the private sector????

One gets the impression SARS sees those with an income as the enemy.

Ain’t it ironic – the sars leeches, acting on behalf of cANCer, focus on peanuts while the big fish get away. Take for instance the zupta crowd and so many others caught with their paws in the cookie jar. Winnie, as another example, claimed R20k per month from mandela as a divorce settlement as this is the level of living she is accustomed to. At the time, R20k was a fortune. I doubt it very much that the so-called mother of the nation ever paid tax other than VAT.

Maintenance payments are not deductible by the payer and not taxable in the recipient’s hands. As to your comment on Winnie not paying tax, it seems none of the ANC elite who benefited from state capture paid any tax on their ill gotten gains. It would be fully taxable, being for services to be rendered.

The problem is that you are 65-85 years old. There are a growing number of people whose last act on earth is to comment on Moneyweb.co.za. Weird and a little bit funny.

For petty rubbish like this SARS has resources. Meanwhile all the thieves in the ANC and EFF get away with whole sale theft.

Start with Brian Shivambu-was that really a loan form the bank VBS that was looted-if so lets see the evidence with a written bank loan agreement -if not-its income and should be taxed-repaid later or not.

Pettiness-directed at largely compliant non ANC taxpayers is what Mr Kieswetter and his Gestapo like thugs excel at

So 10sqm study on a 350SQM home the pro rata portion of rates & taxes, rental or mortgage actual expense, cleaning. Going to come to say 9000 per year deduction call it R3000 tax deduction.

That is for most nothing compared to the after tax cost of commuting and sanity saving two hours in the car each day.

What is it with this country where everybody wants to work an extra angle on everything? Shame I work from home I need extra money for data. No, I deserve extra. I think there was massive abuse of that UIF covid thing. If Johnny was on R15k per month and company reduced that to R8k, people claimed the R7k which is not what the help was about and totally illegal.

SARS want money? Forget home deductions. mandate ALL companies must do a full salary and dis Jess Mentz recon on TERS and have the MD and FD sign for it personally as being correct in terms of the rules. State will get back R20billion.

Just gatvol of termites everywhere I look!

Not sure what happened there !
“ and dis Jess Mentz recon”
w’be
and disbursements recon

The problem is that you are 65-85 years old. There are a growing number of people whose last act on earth is to comment on Moneyweb.co.za. Weird and a little bit funny.

Now now Gene, play nicely. Remember: old people hunt in packs and hardly sleep.

Sars dont allow deductions for my cellphone and email expenses…

So whenever i am asked for this detail for enatis/vehicles i decline my info, if sars do not want to share in expense, why do i need to share it with the state

Next thing you know the commuting costs saved by working at home will be taxed as a fringe benefit.

Johan
bear in mind that ANC stands for two things (1) Absolute No Current (eskom) and if someone don’t understand that then (2) Absolute No Common sense

Wow so funny well done thanks!

Now go die.

You sound like an intelligent person.
Go and assist/consult/plan for the ANC government.
They are governing for the past 27 years and looking at their results/achievements they obviously need you.

BTW congratulations. You can actually appreciate humor……

As things stand, a tax deduction is not worth the trouble and effort to apply for a deduction. The current tax laws are idronic by nature and as such, not worth it.

End of comments.

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