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Allowances and deductions: Two expenses you're NOT allowed to deduct from your income

by , 04 April 2014
One of the biggest challenges companies face is not knowing which expenses they can deduct from their income for the financial year. The danger here is that if you deduct the wrong expenses or claim too many incorrect expenses, SARS will refund you incorrectly and you can face prosecution. Since that's a risk you can't afford to take, never deduct these two expenses from your income.

When it comes to allowances and deductions, never deduct these two expenses

#1: Domestic and private expenses

The Practical Tax Loose Leaf Service says you mustn't deduct private and domestic expenses such as:

  • TV licences;
  • Gardening services;
  • School fees;
  • Costs you incur when maintaining your family or establishment, including rent, repairs and other expenses relating to premises. This is if you don't occupy the property for the purpose of a trade; and
  • Expenses you incur when you employ a child-minder to look after your children so your spouse can earn an income.

#2: Taxes on income and transfers to reserves

You're also not allowed to deduct the following expenses:

  • Any tax, duty, levy, interest or penalty imposed under the Income Tax Act;
  • Any additional tax imposed under the Value-Added Tax Act;
  • Any interest or penalty payable due to the late payment of any tax, duty or levy payable under any Act administered by the Commissioner, the Regional Services Councils Act, the KwaZulu and Natal Joint Services Act and the Skills Development Levies Act; and
  • Income carried to any reserve fund or capitalised in any way.

If you want to get your allowances and deductions right, always remember this golden rule...


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The golden rule for deducting expenses is as follows

Section 11(a) of the Income Tax Act says you can deduct any expenditure and loss you incur in the production of income for your business, as long as it's not of a capital nature.

Now that you know the two expenses you're not allowed to deduct, make sure you comply with tax law so you can avoid penalties. Or worse, prosecution!

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