The Covid-19 pandemic has brought with it a shift towards long term workplace flexibility no one could have predicted. Some parents see it as a blessing, others find it distracting and long for the ‘good old days’ of canteen coffee and conference room catch-ups.
Whatever your views, if you are an employee who finds themselves with a newfound level of workplace flexibility, there is a benefit you might not have thought about. Did you know SARS offers tax benefits for work from home and remote working employees? And if you read the word ‘tax’ and your mind went to a dark place filled with thoughts of deductibles and deadlines then fear not, we’ve broken it down into four easy steps for you.
Do I qualify for tax benefits?
If you are a freelancer or independent contractor working from home in South Africa, then yes, you absolutely do qualify for various income tax benefits. In addition, people who are employed on a fixed term contract or as a permanent employee, who work from home for all or part of the year can claim expenses from their income tax but the requirements are a little more stringent. This includes employees who work partly in office and partly at home in a more hybrid working manner, and would require that you keep a log of the amount of time spent in the office versus at home in order to see if you qualify for the work-from-home tax savings.
What kind of costs can be deducted from income tax?
If you own your own business (even as a sole proprietor), you can track any costs related to operating your own business from home as it can reduce your annual income tax bill. If you are employed and work from home, track any costs you need in order to do your job, such as telephone bills, internet costs, office equipment, stationery, cleaning, rent, bond interest, repair costs to your office premises and other expenses in connection to the wear and tear of your operating equipment and working space. Bear in mind the working space needs to be specifically dedicated for the purpose of work, e.g. a home study set up as an office, it cannot be your kitchen counter or a communal space in the home.
How do I claim income tax back from SARS?
Start by retaining all invoices and slips for expenses incurred. This way you can substantiate that the expenses claimed relate directly to working from home. For hybrid office and home workers, it’s best to keep a running spreadsheet of days worked from home, and days at the office. Then collate your statements and relevant documentation to the days worked at home so you have a complete record of all your work from home activities for tax purposes.
Are permanent and fixed term contracting staff liable for tax deductions?
With Covid-19 making it fairly mainstream to work from home, it is welcome news that all employees are liable for tax deductions for home office expenditure, provided they have worked from home for at least six months of the tax year. This is in line with the ‘Section 11(a) as part of the South African Income Tax Act (58 of 1962).’
As remote working becomes more and more the norm, it’s important to keep track of the Income Tax Act as it is sure to evolve and reflect the ever expanding population of remote workers.