Fire, theft and damage: here's how to lessen the financial loss with a tax deduction
Your business is your pride and joy. You've put a huge amount of money into your assets, your stock and into its daily running.
But what will you do if your business burns down? Or someone steals something? Or if there's damage to your property?
Luckily, SARS is on your side. If you know how to claim these losses as tax deductions, you'll be able to lessen the financial blow. Here's how...
Legally pay less tax
You can claim a tax deduction on losses from fire, theft and damage
Claiming these kinds of losses as a tax write off depends entirely on the kind of assets you lost.
The Practical Tax Loose Leaf
says SARS treats fixed assets, trading stock and cash differently when it comes to claiming them as tax deductions.
Let's look closer at how it treats each one.
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Here's how to claim a tax deduction on fixed assets, trading stock or cash
Trading stock: If your trading stock is lost because of fire, theft or damage, you can claim the loss as a business tax deduction only if they aren't covered by insurance.
Cash: If an amount of money goes missing from your company because it was stolen, lost or a junior employee misappropriated it, you can claim it as a deduction. If, on the other hand, the money was lost because of the wrongful act of anyone in the company with a senior position, you can't claim it as a tax deductable expense. (Companies have taken this latter point to court before and on a few occasions, the counts have allowed companies to claim similar losses.)
So before you claim these losses as a tax deduction, ensure you've checked what kind of assets you lost. If you don't, you could face a SARS penalty instead of a deduction.
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