This blog takes a closer look at the deductions allowed for expenses incurred in a home office environment.
The depreciation of assets
This unsurprising occurrence might have you reaching for the calculator to claim a tax deduction. However, certain requirements need to be met.
Firstly, there is the notion of “small” assets. These may be written off in full in the year of assessment in which they are acquired and brought into use.
Small assets requirements:
- The “small” item must function in its own right;
- The asset doesn’t form part of a set; and
- The asset must have cost less than R7,000 (per item).
Notwithstanding the above requirements, a laptop, printer and fancy scale seldom fall under the above mentioned category.
Assets that don’t qualify as “small” assets have a write-off period (provided for by SARS). This means that the ordinary depreciation for accounting purposes is irrelevant for purposes of determining the tax deduction allowed. For example, a computer (server) can be written off over 5 years. This means you can have that wear-and-tear amount determined as a deduction for the 5 years of assessment as prescribed.
When it’s not used, it can’t be claimed
An asset that qualifies for a wear-and-tear deduction may be purchased in the year of assessment, but you can only claim the deduction in that year if you use it for the purpose of trade in that year. Simply put, the taxpayer is only entitled to claim the wear-and-tear allowance from the date on which the asset was brought into use.
The claiming of an expense is not affected by whether you’re registered as a provisional taxpayer or not. The main requirement is that the expense is claimed for the period in which the home office business has been up and running.
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.