The Income Tax Act requires you to pay normal tax on your taxable income. Even though personal income tax rates are progressive (the more you earn the more tax you pay), your logical goal is to reduce your taxable income – legally, of course. Understanding Section 23 (m) will bring you a step closer...
The Practical Tax Loose Leaf Service explains that this section deals with certain business related expenses, losses or allowances that you won't be able to deduct from any remuneration you receive if you hold any employment or office.
The first step to understanding this section is to determine whether or not it affects you.
Section 23 (m) of the Income Tax Act affects the following people
Section 23 (m) applies to you if you're employed and you earn commission (not exceeding 50% of your earnings);
This section also affects you if you're employed and you earn remuneration as defined in the Fourth Schedule of the Income Tax Act.
In terms of the Act, remuneration includes any amount paid or payable to any person, including:
So who's excluded from Section 23 (m)?
If you render services as one of the following, Section 23 (m) won't apply to you:
If Section 23 (m) applies to you, stay tuned, next week we'll explain how you can make use of the Section 23 (m) deductions to shrink your tax bill.
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