Section 23(m) in the Income Tax Act deals with business related expenses, losses or allowances. It also deals with who can and can't claim tax deductions on those expenses and allowances.
If you're not entitled to claim a business tax deduction and you do, SARS will probably give you a rather large penalty to pay.
Here's who can't claim business tax deductions. If you're one of these people, DON'T ask SARS for your money back...
Every South African tax law explained by our experts
The Practical Tax Loose Leaf Service offers you:
• All the definitions and legal regulations, useful advice, exceptions to the rules that help you slip through the legislative jungle of taxes.
• Case studies and practical examples that show you what elements you should consider for your taxes to be perfect.
• Red flags you need to watch out for and the penalties you'll face if you don't respect them.
• Sample templates at your disposal, ready to be filled in, customised and printed.
Are you one of the entities that can't claim business tax deduction?
Section 23(m) is very clear about who it allows to claim deductions. And that means you can't claim back a tax deductable expense if you're:
• A labour broker and you don't have an IRP30 exemption certificate;
• A personal service company; and
• A personal service trust.
If you're one of these, make sure you don't try claim for any of these as deductible expenses…
Avoid costly tax issues
The 11 deductions outlined in Section 23
These are the 11 income tax deductions Section 23 specifically outlines:
1. Pension or retirement annuity contributions;
2. Legal expenses incurred for any action, claim, dispute or action at law in the course of carrying on your employment;
3. Wear and tear or depreciation allowances;
4. Any business related debt that may have become bad in the year;
5. Any allowance for doubtful debts;
6. Income continuation or protection insurance premiums you have incurred during the year;
8. Travel/vehicle expenditure;
9. Subsistence allowance;
10. Out of pocket medical expenses in excess of 7% of your taxable income before the deduction of medical expenditure; and
11. Donations made to approved organisations that don't exceed 5% of your taxable income.
So now you know what Section 23 says about tax deductions. If you want more information on the deductions you can claim, turn to your chapter in the Practical Tax Loose Leaf
on deductions. Or ask our experts on the Accounting and Tax Club
for help and they'll answer all your questions.