8 Lesser-Known Tax Deductible Expenses
The South African Revenue Service (SARS) has designated tax deductibles for businesses, some lesser-known ones are particularly important for small to medium and freelance businesses to be aware of.
All business operating in South Africa are required to pay tax to the South African Revenue Service (SARS). While there are many taxes to pay, there are also many provisions made to lessen tax burdens by allowing businesses to write off business expenses incurred while producing income.
Let’s look at some of the more commonly misunderstood or missed ones.
1. Expenses Paid By Members / Shareholders
Many people mistakenly believe that they cannot claim expenses that they themselves have paid for. These types of expenses can include business supplies bought with cash or a personal credit card.
2. Incurred Expenses That Have Not Yet Been Paid For
Simply put, tax-deductible expenses that have been incurred, but not yet paid for, are allowed. Business owners can claim an expense, even if the invoice has not yet been paid.
3. Net Operating Losses
Any losses incurred in the same business in previous years can be carried forward as a tax deduction. It is important to note that under the new rules, assessed losses brought forward from a previous year of assessment – regardless of the amount – can only be offset against the higher of R1 million or a maximum of 80% of taxable income for the current year.
4. Home Office Expenses
Working from home has many perks, not least of which are the tax deductibles, items like data or internet expenses, electricity usage, rent, rates and cleaning costs. However, it is vital to note that the claimable amount is based on the percentage of your home that is taken up by dedicated workspace. This applies to freelancers and remote workers who are employed full time by a company. And if you’re using a coworking space those office fees are still claimable as a business expense.
5. Training Costs
Expenses for training that helps you keep or improve skills associated with running your business or the cost of staff training that relates to their roles at the company can be claimed as a business expense.
6. Business Start-up Expenses
Have a brand-new business? All costs incurred during the first year of trading, during the process of setting up your business can be claimed. For instance, any equipment bought for the purpose of running your business, can be claimed as a tax-deductible business expense.
7. Large Capital Expenses
There are many larger expenses that don’t occur on a daily or even monthly basis which are budgeted for in advance. This definition can widen to include:
- office equipment
- business vehicles
- renovation costs
- hardware, such as computers
8. Day-to-day Expenses
Think of items like stationery, petrol, internet and consumables or even maintenance and supplies. Here are a few day-to-day office expenses that can be claimed which you might not be aware of:
- uniforms and PPE
- wholesale purchase costs for inventory
- financial charges (such as bank fees)
- electricity, water and other utilities
- security costs
- cleaning costs (maintenance and supplies)
- insurance fees
- marketing, advertising and promotional expenses
The Key To Claiming Is Accurate Record Keeping
Here are three steps that you can take to make it easier to keep track of everything that you would like to claim for.
- Have a business bank account from which all business-related expenses are paid.
- Make sure to keep both invoices and receipts for any qualifying expense to be deducted from your taxable income.
- Setup a good filing system for your receipts, and separate out expenditure into sections such as entertainment, office supplies, marketing, etc to make it easier to find supporting documentation.
Need Assistance? Appoint An Accounting Team!
At Exceed we offer a variety of help and advice. We can help you with everything from starting a business, to day-to-day bookkeeping and accounting assistance on an ongoing basis by overseeing everything from company payroll and payments to tax consulting and more.
Contact us to get an expert on your team and get you setup for success!