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Will your company qualify for a tax deduction on your losses this year? Read on and find out...

by , 19 July 2013
It's been a tough year for many economic sectors, and your business may be suffering. Come next company tax season, you can give your business a welcome break from SARS by deducting your company's losses and expenditures. Here are the requirements to qualify for a tax deduction on business losses...

The Practical Tax Handbook reveals these easy ways to check if your business can qualify for a deduction of expenditures and losses.
Do you qualify for a tax deduction on your business losses?

In terms of the general deduction formula, you must meet these requirements to qualify for a deduction of expenditure and losses.
  1. You must carry on a trade.
  2. You must derive income from carrying on that trade.
  3. You must claim an amount that constitutes an expense or a loss.
  4. You must have incurred these expenses or losses during the production of the income referred to in point 2 above.
  5. The expenditure or losses must have been laid out or expended for the purposes of trade, to some extent.
  6. The expenditure or losses can't be of a capital nature.

Expenses specifically provided for by other sections of the Income Tax Act should be claimed under those sections.

Watch out! Don't try to deduct these expenses...

You can't deduct these common expenses from your income
  • Private expenses like school fees or au pairing fees (people often try to claim these because the children need to be looked after so both spouses can earn income, but it's not allowed).
  • Losses or expenses you can recover from insurance, security or indemnity.
  • Penalties like traffic fines that weren't incurred in the production of your income.

Now that you've cracked the code of which losses and expenses you can deduct, next year's company tax season will be smooth sailing. 

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