Tax Deduction for Home Expenses under COVID-19

More and more employees are working from home under lockdown conditions. Some may even continue to work from home on an indefinite basis.

The Income Tax Act 58 of 1962 (the Act) allows employees to claim tax deductions for home office expenses that will typically include rent of premises, interest on bond, cost of repairs and other expenses relating to the home office, business calls, stationery, share of domestic cleaning fees, office equipment and wear-and-tear.

In terms of the Act, an employee can claim a tax deduction for home expenses if he or she works from home for at least six months of a tax year in a dedicated work area specifically equipped for work. In addition, the home office must "regularly and exclusively used" for such purposes. You won’t qualify if you work on the dining room table or meet clients in the dining room.

Most employees can’t afford to create a designated home office space. Under lockdown, this restriction is not fair especially because work from home employees will see an increase in their electricity, water, telephone and wi-fi bills.

Under lockdown and perhaps even thereafter the state should amend the strict requirements and allow tax deductions to employees that work from home even if they do not have a designated office space. This would be both an additional COVID-19 relief measure and would promote the principles of fairness and equality.

 

Can a bank sell a repossessed vehicle for a ridiculous amount?

 

FirstRand Bank Limited t/a Wesbank v Davel (1229/2018) [2019] ZASCA 168 (29 November 2019). 

FirstRand Bank Limited t/a Wesbank (Wesbank), concluded a written instalment sale agreement with Davel, in terms of which he purchased a 2010 Volkswagen Polo, payable over 59 months with a balloon payment in the 60^th month. Davel fell behind on the payment of his instalments. 

Wesbank sent him a notice in terms of s 129(1)(a) of the National Credit Act 34 of 2005 drawing his attention to the options available to him in terms of the Act, but also stating that, in the event of him not choosing any of them, legal action would be instituted against him claiming, inter alia, cancellation of the agreement and return of the vehicle. Mr Davel did not respond to the notice, prompting Wesbank to issue summons claiming the relief it had threatened. This was followed by an application for summary judgment by Wesbank, in terms of which it claimed, inter alia, the cancellation of the agreement, the return of the motor vehicle and that the entire damages component of its claim be postponed sine die. It also sought forfeiture of all monies paid by Mr Davel. 

The court had to decide what relief to grant. It had to balance the interests of the credit provider (Wesbank) and the credit receiver (Davel). the Credit Act provides protection for consumers and for the enforcement of the rights of credit providers - an "equality of arms". 

The court was concerned that there was a tendency to recover vehicles and then sell them at a ridiculous price. It ordered Wesbank (the plaintiff) to give Davel (the defendant) notice: 

a)    setting out the estimated value of the vehicle;

b)    informing the defendant that it intends to sell the returned vehicle as soon as practicable for the best price reasonably obtainable; and

c)    informing the defendant that the price obtained for the returned vehicle upon its sale may be higher or lower than the estimated value; 

Thereafter, the plaintiff had to sell the returned vehicle as soon as practicable for the best price reasonably obtainable. After selling the returned vehicle, the plaintiff was required to: 

a)    credit or debit the defendant with a payment or charge equivalent to the proceeds of the sale less any expenses reasonably incurred by the plaintiff in connection with the sale of the goods; and 

b)    give the defendant a written notice stating the following: 

                      i.        the settlement value of the agreement immediately before the sale;

                     ii.        the gross amount realised on the sale;

                    iii.        the net proceeds of the sale after deducting the plaintiff’s permitted default charges, if applicable, and reasonable costs allowed under paragraph (a); and

                    iv.        the amount credited or debited to the defendant’s account. 

The notice had to state that: 

a)    If the defendant disputes the amount of the proceeds of the sale or any other charges or expenses incurred, he or she may engage directly with the credit provider in relation thereto. 

b)    If the engagement referred to in (a) does not yield, from the defendant’s perspective, the desired result, he or she may, refer the dispute to the Tribunal or submit a complaint in terms of s 136 of Credit Act 34 of 2005 to the National Credit Regulator. 

If an amount falls to be credited to the defendant’s account which exceeds the settlement value immediately before the sale of the returned vehicle, the plaintiff must remit such excess amount to the defendant. 

If an amount is credited to the defendant’s account which is less than the settlement value before the sale, or an amount is debited to the defendant’s account, the plaintiff may demand payment from the defendant of the remaining settlement value. If the defendant fails to pay the amount demanded within 10 business days of receiving such demand, the plaintiff may commence proceedings against the defendant for any outstanding damages.

 

DOG BITES – WHAT DEFENCES CAN AN OWNER RAISE?

In Van Meyeren v Cloete (636/2019) [2020] ZASCA 100 (11 September 2020) the Supreme Court of Appeal (SCA) had to consider the rights and responsibilities of dog owners in South Africa. 

In this case, a gardener and refuse collector (Cloete) was attacked without any warning or reason by three dogs on a Cape Town street. His injuries were serious and resulted in the loss of his left arm from the shoulder. He said that he did not do anything to provoke the dogs and was minding his business and was lawfully present on the public road where the attack took place. He subsequently instituted a claim for R2.4 million for damages. 

The owners of the dogs were not home at the time of the attack and denied liability. The basis for this defence was that the dogs had been locked inside the property, but an intruder must have tried to gain access through a locked gate, broken both padlocks fastening it and either left the gate open or in a state where the dogs could open it.

SCA ruling

Cloete’s claim was based on the legal principle of ‘actio de pauperie’ – which holds that the owner of a domesticated animal is ordinarily held strictly liable for harm caused by that animal. This means that an injured party does not have to prove negligence on his or her part and a victim of a dog bite can claim damages from a dog owner without having to prove fault. 

In its ruling, the SCA said that there are three recognised defences to such a claim:

·         That the injured party was in a place where they had no right to be.

·         The animal was provoked either by the injured party or a third party.

·         That custody and control of the animal has passed to a third party who negligently failed to prevent the animal from causing the harm.

·         The owner’s argument that these defences should be extended to include any situation where the harm was caused by negligence on the part of any third party was rejected by the court. The court thus found the suggestion that a third party allowed the dogs to escape the property was not a defence.

·         It held that constitutional norms did not justify such an extension and that where harm is caused by a domesticated animal, it is in principle appropriate that responsibility for that harm rests with the owner of the animal and not the injured party.

The judge stated that “If anything, with the growth of urban living, the vastly increased number of pet animals, especially dogs, in our towns and cities and the opportunities for harm that they pose, that view of where the interests of justice lie has been strengthened,” and  that “People are entitled to walk our streets without having to fear being attacked by dogs and, where such attacks occur, they should in most circumstances be able to look to the owner of the dog for recompense.”

The SCA subsequently dismissed the appeal by the dog owner and found that he was liable to compensate the victim for injuries. You can read the full ruling in the attachment.

 

Employment rights under lockdown

What happens if a business is forced to close because of Covid-19 and it becomes impossible for an employer and employee to perform under an employment contract? The law states that if both employer and employee are unable to do so, then the obligations of both parties are suspended, until the lockdown ends, and it becomes possible for work to continue.

 

Before Covid-19, South African employment law and labour courts generally found that the employer had to pay an employee a salary even when the employee did not render services, e.g. in war conditions, where the free movement of employees was restricted.

 

Now, under the current government-imposed lock-down and limitation of economic activity, employees are restricted from movement unless working in enterprises which are recognised as essential or providing permitted services.

 

If the employer is not such an enterprise, the employee is placed on temporary lay-off, or unpaid leave. To assist vulnerable workers, who are subject to a temporary lay-off, resulting from the lockdown, the South African government has made R500 billion available, through schemes such as the Temporary Employee Relief Scheme, administered by the Unemployment Insurance Fund.

 

If an employer is obliged to trim its workforce because it has become impossible to operate, if it seeks to dismiss any employee, it must still ensure that any dismissal is fair and must follow due process laid down by our employment laws.

 

Does the estate of a deceased grandparent have an obligation to support a grandchild?

 

Phillipa Susan van Zyl NO v Getz (548/19) [2020] ZASCA 84 

The mother of a child asked the Supreme Court of Appeal (SCA) for a ruling obliging the estate of a grandparent of her child to maintain the child. 

Both parents were alive. The mother could not afford to maintain the child and the father had moved to the United States. No serious steps were taken to find him and establish his financial means. 

Two common law rules govern the legal duty of support of grandchildren by grandparents. The first basic rule provides that where a grandchild is in need of support, his or her grandparent will have a legal duty to maintain him or her, only if both parents are unable to support the child and the grandparent is able to provide support. The rule is not clear where the parents or one of them is able but unwilling to support the grandchild, or cannot be found. The second rule as set out in Barnard NO v Miller 1963 (4) SA 426 (C) is that a legal duty to support a grandchild is not enforceable against a grandparent’s deceased estate. 

The court was asked to develop the common law to recognise a duty of support on the part of a grandparent’s deceased estate. 

The current legal position regarding the duty of support 

At law, liability to maintain is based on three factors: firstly, the claimant’s inability to support himself or herself; secondly, his or her relationship to the person from whom he or she claims support; and thirdly, the latter’s ability to provide support. 

The common law and Section 18(2) of the Children’s Act 38 of 2005 recognise that parents are the primary caregivers of their children by imposing on them a duty of support insofar as they can do so. There is a reciprocal duty of support between parents and children. If parents are unable to support their children who need support, other relatives including grandparents, may be obliged to support them. But that duty is imposed first upon a nearer relative before it moves to remoter ones. 

The liability of the grandparent’s deceased estate for the support of the grandchildren is not clear, so the SCA was asked to develop the common law but it declined to do so. It found that on a factual level, the mother’s case was deficient. The appellant sought on the stated facts to impose a duty to support a grandchild on a grandparent’s deceased estate where the parent of a child cannot be traced. But the mother did not take reasonable steps to locate the whereabouts of the father after he left South Africa to live in the United States or that she had exhausted all reasonable options open to her to find him. 

The child’s father, who is primarily responsible for the child’s maintenance, may be able to financially support the child. This would render it unnecessary to develop the common-law rule. Financial inability by a person from whom maintenance is sought must be established before that obligation is assumed by, or transferred to, another person. 

The court’s finding 

The court found that if it recognised the claim against a deceased grandparent’s estate – as a general principal – this had the potential to compete with the heirs of a deceased grandparent. It could also compete with other claims for maintenance that may arise, including by a surviving spouse or child. 

The court concluded that “due to the insufficiency of the evidence upon which to develop the common-law rule enunciated in Barnard and the wider consequences the proposed change will have on the rules of the law of succession, it would be inappropriate for this Court to develop the common law. The development sought by the appellant is quite drastic and may implicate various constitutional values. Parliament is the forum best suited to undertake such development if it is considered appropriate”.