Lesser-known incentives

GOVERNMENT MEASURES: THINGS TAX-SAVVY INVESTORS SHOULD KNOW

Sars does offer a carrot to people who work from home.

Taxpayers recently started paying higher taxes in a number of areas. The VAT increase is in full swing, estate duty has increased, fuel levies are adding extra strain and the usual tobacco and alcohol duties all add to the consumer’s already heavy tax burden.

However, the government has come up with a few masterful tax incentives, designed to promote employment, boost small- to medium-business entrepreneurs and promote scientific and technological innovation.

Home office expenses

Many people prefer the freedom and autonomy of working from home, thereby saving themselves stress and the loss of productivity owing to a daily commute to the office. Self-employed individuals and employees who often work from home may be able to reduce their taxable income by claiming some home office expenses. However, Sars has set out specific conditions.

If more than 50% of your income comes from a salary, you can qualify only if your employer allows or requires you to work from home and if you spend more than half your working hours in your home office.

If you are a commission earner and your employer does not provide you with an office at company expense, you should be able to qualify.

You will definitely qualify for the deductions if you are a small business owner or a freelancer who always works from home.

The home office

A specific part of your home needs to be used exclusively as your office. Working off your dining-room table or holding meetings in your living area will not suffice for Sars purposes. A specific area of your home needs to be fully equipped for your office requirements. Taxpayers need to ensure that they have the necessary furniture, fittings, and computer equipment, and internet and telephone connections, amongst others.

It is important that taxpayers detail the square meterage of their home office on a floor plan as this will be used to determine what percentage of the office expenses will qualify as a deduction against taxable income.

Expenses that qualify

Rent or interest on a bond will likely be the biggest deduction in most cases. Repairs to the premises and cleaning and maintenance services also qualify. Rates and taxes and electricity are also deductible. Printing and stationery, telephone and internet and security also qualify.

An expense that many taxpayers overlook is the wear and tear on home office assets such as IT equipment and furniture and fittings.

It is important that taxpayers can prove to Sars that the asset was specifically acquired for the home office and that it cannot be easily transferred to another part of the home.

For example, a specialised desk would qualify as a wear and tear deduction; however, an ordinary table that could be used elsewhere in the home would not qualify.

Research and development

Sars is very much aware of the need for South Africa to become more actively engaged in scientific and technological innovation to save the country from having to pay exorbitant royalty fees to foreigners and to aid economic growth.

The fiscus has therefore provided a very generous tax deduction of 150% for all qualifying expenditure regarding scientific and technological research and development.

The taxpayer needs to prove to the department of Science and Technology that the project will contribute to SA’s scientific and technological body of knowledge, thereby aiding economic growth.

Sars also stipulates that the project should benefit South Africa as a whole and not only the taxpayer’s business.

Nicole Janse van Rensburg is a manager at Hobbs Sinclair Advisory.