Imagine this scenario: Your office is raided by thieves during the weekend, but not all the stolen assets were covered by you insurance policy. Or your office burns down and everything is lost and you're only insured for some of the key high-risk assets.
Do you qualify for a tax deduction?
The short answer is 'Yes'.
BUT, it all depends on the nature of the losses and the extent to which the loss is recoverable under an insurance policy.
The following will happen if you don't have an insurance policy to cover losses you suffer due to theft or damage
#1: Loss of fixed assets: If the fixed asset has been used in the business, you can claim a scrapping allowance.
If the fixed asset was for private use only, you won't qualify for deduction, as it's of a capital nature.
For example, a stolen desktop computer that was not covered under your insurance policy won't be an allowable deduction if it was for private use. However if the computer was used in carrying a business the loss could be claimed as a deductions as an expense against any taxable income.
#2: Loss of cash: According to the Practical Tax Loose Leaf Service, losses due to the theft of cash by the owner of a business has been held to not be deductible. This is evident in the ruling of Lockie Bros Ltd vs. CIR 1922 TPD.
But, losses due to cash theft by employees or thieves are deductible to the extent that no recovery will be made under an insurance policy.
#3: Loss of trading stock: While the Income Tax Act doesn't state that you can claim a deduction for the loss of trading stock, SARS does allow a deduction to the extent that the stock loss isn't recoverable under an insurance policy, or similar compensation.
For example: Let's say a rented truck was high jacked and all the goods in the truck, to be delivered to a client, could not be recovered. The loss of the goods could be claimed as a deduction as an expense against any taxable income.
Well there you it. If you don't have an insurance policy to cover losses you suffer due to theft or damage, you'll only qualify for a deduction under the circumstances mentioned above.