Working From Home and Tax Implications

While working remotely has become a norm for many companies it does come with certain complications such as a scattered workforce and its various tax implications. While many offices are equipped to help employees work efficiently, working from home for long periods of time can become challenging, the need for equipment and supplies therefore becomes substantial.

If you are an employee who works from home, here are some important points to take notes of.

1. Reimbursements

• These amounts have the benefit of not being taxable, as they do not constitute remuneration.
• The employee must bear the office expense first and keep all invoices and receipts to be able to claim the amount from the employer, and the expense must be incurred because of your rendering services to your employer.

2. Advances from employers

• The amount received from your employer to be used for your home office expenses.
• Has the same benefits as reimbursements.
• The expense must also be related to the rendering of your services to your employer.
• All invoices and receipts must be kept.
• If the advance is excessive and not fully utilised by the employee, the employer will claim the excess from the employer.
• If the advance is deficient, the employee will claim a reimbursement from the employer.

3. No reimbursements

• Section 23(b) of the Income Tax Act states that a tax deduction for home office expenses may be allowed if the following requirements are met:
  • The space used as a home office is regularly and exclusively used for the purposes of the taxpayer’s employment. And the space is specifically equipment and set up solely for the purpose of working.
  • If your salary is only remuneration, your duties must be mainly performed in this part of your home. More than 50% of your duties must be performed in your home office.

Examples for home office expenses include:

• Rent paid for your home.
• Interest on a bond for your home.
• Cost of repairs to your home
• Expenses in connection to your home

In addition to these expenses, other typical home office expenditure may include:

• Phones
• Internet
• Stationery
• Rates and taxes
• Cleaning
• Office equipment
• Wear-and-tear

The tax deduction for home office expenses is calculated on a pro-rated basis which is based on the square meters of the area of home office versus total square meters of your home. Only expenses relating to the premises must be apportioned based on floor area (such as for example rent, interest on bond, rates and taxes, cleaning, etc.) Expenses that do not relate to the premises (such as wear and tear on equipment and furniture) do not need to be apportioned based on floor area.

This article was written by: Renisha Arjoon, Professional Accountant (SA)

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