Working from home during Covid19 lockdown- can you claim any tax deductions?

So here you are, sitting at home during Lockdown, but far from it being like a holiday you are working as hard as ever, if not harder (especially taking into account the time the you are having to put in keeping your children educated (the schools have been amazing but children need input) and that someone in the house has to cook every meal (no treats out to a restaurant with your friends or ‘other half’)) and clean the house. After President Ramaphosa announced the Lockdown on Sunday 22 March your employer told you to take your work laptop home, make sure you have enough data and simply continue working from home. Since then its been the usual overload of emails and more, as well as on-line meetings seemingly back to back. You miss your coffee break with the work team- but this is Lockdown and you’re grateful that you have the opportunity to keep yourself and your family safe and that you still have a job!

Nevertheless, since you’re using your own data, telephone, space at home, stationery etc i.e it’s costing you to use your home as your office over the lockdown period, you’re wondering if there are any tax deductions that you could claim when you fill out your tax return for tax year ended 28 February 2021. The current Government tax announcements have made no mention of this but you don’t want to lose out if there is anything available.

Unfortunately, the rules for claiming ‘home office’ expenses are quite restrictive:

Firstly, your income must be derived from being a sole trader or, if you are an employee, you must either be paid on the basis of commission or other variable payments which are based on your work performance and your duties are mainly(more than 50%) performed outside your employer’s office  or, even if your salary is fixed, your duties for your employer must be mainly (more than 50%) performed in your home office.

Thus, if you usually work from your employer’s offices you would not ordinarily be able to claim any of the ‘working from home’ costs against your salary. The question arises whether one can argue that during the Lockdown period you are required to work “mainly” (being 100%) from home and could thus claim relevant costs as a deduction against your remuneration for this period only, provided you satisfy the remaining requirements. Hopefully, the South African Revenue Service will soon give some clarity on its view on this.

However, even if you have ticked the first box, you are prohibited from claiming domestic or private expenses, which include the interest portion of a home bond repayment or rent on your home, the cost of repairs thereon or any other expenses in connection with any portion of your home that is not occupied for trade purposes.  In order to be considered to be occupied for trade purposes the part of your home which is used as an office must be specifically equipped for trade (work) purposes, and regularly and exclusively used for those purposes. 

This means that you will only be able to claim expenses relating to working from home if you have a room that you use as an ‘office’ and it is not used for any purpose other than as an office.  Thus, if you use your dining room table or a desk in your bedroom or your ‘office’ doubles up as a family room or second bedroom you will not qualify to claim any of the costs. Remember that the South African Revenue Service can ask you to prove that your office at home is exclusively used for that purpose, so it’s not worth taking any chances.

But if you are able to tick all these boxes and you are entitled to make a claim in respect of your office at home it is important to maximise the claim and to retain all the relevant documentation which will support the claim. (If you are VAT registered, be careful, though. An office at home could have significant VAT implications on future sale of the property or if you deregister for VAT purposes).

The type of expenses that you pay that might relate to your home office and which would be claimable are, for example, the portion of your home bond interest or rent, insurance, rates, electricity and water that relate directly to the relevant area of your home that is used as the office.  Cleaning and maintenance costs which relate to the office may also be claimed.  Thus, you may claim a portion of your cleaning materials etc.. You may also claim depreciation (‘wear and tear’) on the assets equipping the office… the computer (if it is your own and you paid for it), the desk, desk light, bookcase and chair(s) etc.  The cost or value of these assets may be claimed over their useful lives e.g. you could claim furniture and fittings over six years.

You may deduct consumables … stationery, data, printer ink cartridges but only to the extent used for trade purposes.

Insofar as the phone is concerned, if you have a separate business/work phone you may claim the entire costs as being for business purposes.  If the same phone is used for domestic as well as for business purposes you may only claim so much as relates to business use.  It may be worth keeping records initially because you may need to substantiate the claim to SARS.  

Something else to consider, if you don’t satisfy the requirements to claim a home office is, if your employer has advised that it will reimburse you for data, stationery, phone costs etc that you use whilst on Lockdown you may claim such costs against such reimbursement. Clearly, you will need to justify such costs to your employer and would be able to demonstrate these same costs to SARS.

Any amounts that you can deduct for the lockdown period of (currently) 5 weeks may not be large but may be worth considering. Of greater importance, perhaps, is that Covid19 is changing the way we work. It is proving that, for many, working from home can be just as efficient as being at the office. Might these kinds of arrangements become more common even when we come out at the other end of this virus? The way we deal with claiming genuine business costs of this nature for tax purposes is, thus, likely to need to considered more carefully.

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