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Do you know whether your business is excluded from Section 23(m) of the Income Tax Act?

by , 22 April 2013
No one likes to hand more money over to SARS than they have to. That's why Section 23(m) on the Income Tax Act is such a firm favourite with companies and business owners alike. It deals with the types of business-related expenses, losses and allowances you're able to deduct to pay less tax to SARS. But here's the thing that many people don't realise, not everyone can use Section 23(m) to their advantage...

'Most businesses literally donate cash to SARS because they don't know what tax deductions are available to them,' says the Practical Tax Loose Leaf.

That's where Section 23(m) can help.

After all, it stipulates a number of tax deductions you're entitled to – including some frequently forgotten ones like:

  • Claiming the costs incurred in developing your next 'big idea';
  • Repair and maintenance allowances;
  • Home office expenses; and
  • The tax benefits of spending a night away from home.

But not everyone can claim tax deductions under Section 23(m).

These five businesses are excluded from Section 23(m)

If you render services as one of the following, says the Practical Tax Loose Leaf, Section 23(m) won't apply to you:

  1. A labour broker who isn't in possession of a valid IRP30 exemption certificate;
  2. A personal service company;
  3. A personal service trust;
  4. A natural person who normally earns mainly commission attributable to your personal sales or turnover;
  5. Or an independent contractor, such as a sole proprietor.

In each case, many of the allowances and deductions stipulated by the Income Tax Act, aren't applicable to you and you won't be able to claim tax back on your expenses.

Bottom line: By understanding whether or not Section 23(m) refers to your business enterprises, you'll know exactly what you can and can't claim from SARS when it comes to allowances and deductions.



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Comments
1 comments


Quentin Dobeyn 2013-04-24 15:25:49

I am most intrigued by the constant reference to sect 23m deductions only being available to commission earners! Each time I read an article they constantly refer to commission earners.

I take as an example a taxpayer who earns Dividends from private and listed companies, earns interest on loan accounts in companies/CC,s and investments, earns rent from properties and earns a salary, due to being a member of CC,s. All of the above incomes together, excluding his salary, are greater more than 50% than the salary earned. PAYE is deducted from the salary.

He incurs bond interest, insurances on the properties, email/phone, travel, etc, etc, all incurred directly in the production of the various incomes. Nowhere does he earn a commission.

Am I missing something hidden behind the linked word COMMISSION to only apply to Sect 23m deductions?? I do understand that a taxpayer would have separate income statements to indicate the net taxable income from each of the relevant areas.

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