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Thread: Deducting portion of rent/bond repayment

  1. #1
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    Deducting portion of rent/bond repayment

    Hi,

    I work for a pretoria based company in the western cape. My company has no office in WC and as such I work from Home. It is my understanding that a portion of the rent qualifies as a deduction from gross income because:

    i) a portion of the flat is equipped solely for the purpose of my trade from which I derive my income;
    ii) I receive no allowance from my employer for this portion of the flat.

    I've briefly been through the "allowable deduction" section of the income tax act and the only relevant section I can find is par 23 (1), namely,

    1) No deductions shall in any case be made in respect of the following matters, namely--

    a) the cost incurred in the maintenance of any taxpayer, his family or establishment;
    b) domestic or private expenses, including the rent of or cost of repairs of or expenses in connection with any premises not occupied for the purposes of trade or of any dwelling-house or domestic premises except in respect of such part as may be occupied for the purposes of trade: Provided that--

    a) such part shall not be deemed to have been occupied for the purposes of trade, unless such part is specifically equipped for purposes of the taxpayer's trade and regularly and exclusively used for such purposes; and
    b) no deduction shall in any event be granted where the taxpayer's trade constitutes any employment or office unless--

    i) his income from such employment or office is derived mainly from commission or other variable payments which are based on the taxpayer's work performance and his duties are mainly performed otherwise than in an office which is provided to him by his employer; or
    ii) his duties are mainly performed in such part.

    Help pse!

  2. #2
    Silver Member Graeme's Avatar
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    You may claim, but watch out - if SARS inspect the room you use as an office and find just one item of non-office equipment there, say a sewing machine, you are in trouble.

  3. #3
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    The deduction of any expenses relating to any residence or domestic premises is prohibited except in respect of such part as may be occupied for purposes of trade. Such part of the premises will only be regarded as being used for trade if:

    • It is specifically equipped for purposes of your trade; and
    • It is used regularly and exclusively for such purposes.

    If the income against which the deduction is claimed flows from the holding of employment or an office no deduction is allowable unless:

    • Your income from such employment or office is derived mainly from commission or other variable payments which are based on your work performance and your duties are mainly performed otherwise than in an office which is provided to you by your employer; or

    • Your duties are mainly performed in the study at your private residence.
    The following guidelines are given with regard to a claim for a home study. Full details in support of your claim must be retained for a period of five years after submission of your return. Documentation in substantiation of the claim is to be kept and only submitted on request.

    • There must be a direct relationship between the incurring of the expenses on a study and the production of income.

    • You must, in terms of the requirements of a service contract with your employer, be required to maintain a study at your private residence.

    • The study may be used only for business purposes.

    • A schedule detailing the following must be prepared and retained for a period of fi ve years should SARS call for it.

    - What is the nature of your occupation and why is it necessary to maintain a study at your home?

    - A copy of your service contract, service regulations or personnel code.

    - Does your employer place an office at your disposal at your workplace? Full details of any restrictions in the use of this office are to be furnished, as well as a letter of confirmation from your employer.

    - Is your work of such a nature that you are expected to work at home after hours? Full details of how frequently you use the home study as well as a statement confirming the use thereof is required from your employer.

    - Are you required to use the home study to interview or supply information to clients or employees after hours?

    - Is your home study specifically equipped for purposes of your trade?
    - Is your study used regularly and exclusively for your work?

    - To what extent is the study indispensable to the proper carrying out of your tasks?

    • Should you qualify for a deduction the amount will be calculated on the following basis:

    A / B x Total costs, where

    A = the area in m² of the area specifically equipped and used regularly and exclusively for trade;

    B = the total area in m² of the residence

    (including any outbuildings and the area used for trade the residence), and

    Total costs = the costs incurred in the acquisition and upkeep of the property (excluding expenses of a capital nature).

    Repairs specifically made to the study will not be apportioned, but allowed in full. Repairs to the building in general are not included in total costs.

    Another important point to remember - in the event that you sell your house, that portion of your property used as an office no longer qualifies for "primary residence" exclusion for Capital Gains Tax purposes - that portion became a "trade" asset by submitting the office at home deduction.
    Last edited by Morticia; 03-Jul-09 at 01:11 PM. Reason: clarification

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    Dave A (03-Jul-09)

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