Draft interpretation note 28 (Issue 3) - Deductibility of home office expenses

This note provides guidance on the interpretation and application of - 

i) Section 11, which serves as the positive test, as it deals with the deductions that are allowed in the determination of taxable income and  in so far as it relates to home office expenses, draws no distinction between taxpayers in employment, taxpayers that are holding an office or other taxpayers.

ii) Subsections 23(b) and 23(m) which serve as the negative tests, since they deal with deductions which are not allowed in the determination of taxable income.

iii) Section 23(m) is applicable if the taxpayer is in receipt of remuneration derived from employment or the holding of an office, unless the remuneration is derived mainly from commission based on sales or turnover. As far as home office expenses are concerned, the taxpayer will only be able to claim rental, repairs and expenses incurred in relation to a dwelling house or domestic premises under section 11(a) and (d), and wear-and-tear allowances under section 11(e). Home office expenditure must still escape the restrictions imposed by section 23(b).

iv) Paragraphs 45(4)(b) and 49(b) of the Eighth Schedule, which deals with capital gains tax consequences on the disposal of a primary residence used partially for purposes of carrying on a trade and in the case of a taxpayer that makes use of a home office, the primary residence exclusion of R2 million must be apportioned for the non-residential use and the R2 million-proceeds rule for disregarding any capital gain, does not apply to the part of the premises used for purposes of trade.

Comments may be emailed to policycomments@sars.gov.za by 14 June 2021.

Find a copy of the note here.​

04/06/2021