According to MOM’s Labour Force statistics in December 2020, nearly half of all resident employees in Singapore had worked from home due to COVID-19. This was primarily due to the Circuit Breaker between 7 April 2020 and 1 June 2020, as well as ongoing COVID-19 safe management measures.
Despite the gradual easing of safe management measures in Singapore, many employees are continuing some form of work-from-home arrangements.
Read Also: Safe Management Measures To Be Eased From 5 Apr 2021: 10 Things Businesses Need To Know
As we emerge from the pandemic, another question has arisen – especially since we are in the middle of tax season right now – what about the additional costs employees have had to bear while working from home?
Add to fact that median income has also dipped in 2020, this can potentially add a strain on families here.
To help employees offset these costs, employers can consider reimbursing their employees. This is especially if your business is in the position to do so and/or has managed to reduce office rental costs, utilities and stationery and other office maintenance costs, that has been effectively passed on to your employees.
For employers who are unable to reimburse employees, you can direct your employees to IRAS’ framework for deducting allowable work-from-home expenses when they submit their income tax returns.
Allowable Expenses That Employees Can Claim On Tax Returns
Employees can already claim employment expenses that are “wholly and exclusively” for the production of their employment income. According to IRAS, these expenses must be:
#1 incurred while carrying out their official duties;
#2 not reimbursed by employers; and
#3 not capital or private in nature.
Some examples of allowable expenses include:
- entertainment expenses incurred when hosting clients. However, IRAS requires employees to exclude their share of the entertainment expenses.
- subscriptions paid to professional bodies or society for professional updates, knowledge and networking.
- travelling expenses incurred on public transport, such as buses, trains or taxis. These are for work-related travel rather than for travel from your home to the workplace and back.
At the same time, employees should also note that they cannot claim expenses for social purposes or maintaining goodwill, such as for meals with colleagues. Any expenses incurred for meeting potential clients are also not claimable.
If an employee leaves their job, any payment in lieu of notice for failing to serve the notice period, is also not claimable.
Read Also: How To Calculate Leave Encashment Or Salary-In-Lieu Of Notice Period For Your Employees
Allowable Working-From-Home Expenses (For Employees To Claim On Tax Returns)
In addition to the existing list of allowable expenses, IRAS has also created a list of work-from-home expenses that employees can claim on their tax returns. For employers, if you have reimbursed your employees for certain expenses, you can remind them that they should not be making the same claims.
The expenses that work-from-home employees can claim against their employment income include:
- Electricity charges
- Telecommunication charges
Only additional charges for your electricity and telecommunication charges can be claimed against your employment income. Employees have to compare their bills before and after their work-from-home arrangements.
If there are more than one person working from home within the household, IRAS also allows equal apportionment for the increase in shared expenses.
If an employee’s monthly electricity bill was $170 in March 2020, before any work from home arrangements was implemented, that can be used as a base figure for the rest of the year.
If the average electricity bill goes up to $220 for the remaining months in 2020 that the employer instituted a work from home policy, the employee can make a claim of ($220 – $170) x 9 months. For example:
| Month | Base Electricity Bill | Actual Electricity Bill | Allowable Claim Amount |
| Mar | $170 | $170 | N.A. |
| Apr (start work-from-home arrangement) | $170 | $220 | $50 |
| May | $170 | $230 | $60 |
| Jun | $170 | $210 | $40 |
| Jul | $170 | $220 | $50 |
| Aug | $170 | $220 | $50 |
| Sep | $170 | $220 | $50 |
| Oct | $170 | $220 | $50 |
| Nov | $170 | $220 | $50 |
| Dec | $170 | $220 | $50 |
| Total | $450 |
In this scenario, each of the working-from-home persons within the household can share an equal portion of the allowable claim amount.
Note that HDB households that receive U-Save rebates for their utilities must also deduct a proportionate amount for their electricity charges. In addition, the government also gave out a one-off $100 utilities credit, which should also be deducted proportionately for the month’s electricity bill. For example:
| Month | Base Electricity Bill | Actual Electricity Bill | Allowable Claim Amount |
| Mar | $170 | $170 | N.A. |
| Apr | $170 | $220 | $50 |
| May | $170 | $120 (after deducting a proportionate amount of U-Save rebate) | $0 |
| Jun | $170 | $210 | $40 |
| Jul | $170 | $150 (after deducting a proportionate amount of $100 one-off utility credit) | $0 |
Working-From-Home Expenses That Employees Cannot Claim On Their Tax Returns
Employees can only claim additional running expenses incurred for work purposes. Put in a simple way, even though they had to cook more and use more water while at home, they cannot make claims for their water or gas bills as these are for private purposes.
Already highlighted above, the government has provided U-Save rebates and a $100 utility credit in 2020. These have to be taken into account when calculating the claimable additional electricity expenses.
Expenses that are capital in nature also cannot be claimed. This means setting-up cost of a better home fibre broadband or purchases an office chair and/or desk are not claimable.
Employees also cannot claim for additional home broadband costs after they are no longer required to work from home. This means the period an employer allows/requires its employees to work from home is important to note. AND, if an employee signs up for a contract for their home broadband, they cannot continue to claim any amount once they return to the workplace.
Employees Have To Keep Proper Records
The deadline for employees to file their income tax is 18 April (for e-filing) and 15 April (for paper filing).
Employees should enter their employment expenses claim under the “Employment” section in their Income Tax Return.
They have to keep complete and proper records of all expenses incurred for 5 years. This means anything claimed in YA2021 (and incurred in 2020), has to be kept until 31 December 2025. These records and accounts must be supported by invoices, receipts, vouchers and other relevant documents. Estimates and improper records are not allowed.
Employees can use an Employment Expenses Schedule provided by IRAS to keep track and record the details of their employment expenses.
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