A Tax Deduction for Home Office Expenditure: The Interpretation of and Proposed Removal of the Exclusive-Use Requirement in Section 23(b) of the Income Tax Act

Abstract

Hybrid and remote working opportunities have become more prevalent, leading to an increase in attempts to claim income tax deductions for home office expenditure. SARS disallowed over R1.8 billion of the R2.9 billion home office tax claims in the 2021/2022 tax year. Unfortunately, efforts to lobby government to relax the requirements of section 23(b) of the Income Tax Act 58 of 1962 have not been met with legislative response. Section 23(b)'s exclusive-use requirement is particularly troublesome. Given the lack of legislative response, this article considers whether the exclusive-use requirement may be interpreted in a manner that would assist more taxpayers to claim a home office deduction. This article argues that the exclusive-use requirement does not require taxpayers to set aside an entire room to be able to claim home office expenditure. Unfortunately for taxpayers, it also finds that "exclusively" is not reasonably capable of bearing a meaning other than "solely" and that absent the application of the de minimis non curat lex rule, any private use of the home office space is fatal to the deduction of home office expenditure. The limited application of the de minimis non curat lex rule to dismiss insignificant private use offers no solution to taxpayers who live in modest homes and who necessarily work in mixed-use spaces. It also considers SAIT's proposal to tie the exclusive-use requirement to working hours through an interpretative argument and argues that it is unlikely to succeed. This article ultimately concludes that it appears as though taxpayers will find little relief from the exclusive-use requirement through interpretive arguments and must increase their efforts to lobby for legislative amendments instead. However, caution is required because SAICA's proposal that the exclusive-use requirement be removed through legislative amendment could trigger unintended consequences.