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Pay less tax using these seven deductions

by , 02 May 2014
If you're a salary earner, or your earnings aren't mainly in the form of commission for your personal sales, you can claim the following seven deductions:

  1. Pension, provident or retirement annuity contributions deducted from your salary (Section 23(m)(i)).
     
  2. Legal expenses you incur for any action, claim, dispute in the course of carrying on your employment, which isn't of a capital nature. Capital nature in this case refers to any legal expenses not related to receiving or earning your salary. So if you've spent lots of money on a divorce lawyer this year, it won't be deductible.

    But, if you start legal proceedings against your employer or former employer for your salary or another benefit not paid, this isn't capital in nature and will be deductible.

    Be careful! If the legal action is to protect your employment, i.e. unfair dismissal, the legal expenses won't be tax-deductible because this action is capital in nature (Section 11(c) read with Section 23(m)(ii)). Generally, legal expenses incurred to protect your ability to earn a salary are considered capital and aren't deductible!
     
  3. Wear and tear or depreciation allowances on the assets you use for business purposes, such as a personal computer or cell phone (Section 11(e) read with Section 23(m)(ii)). You don't need to use the asset wholly and exclusively for work purposes either. You can claim for a portion of the asset's wear and tear, as long as you use it for business. 
Keep reading for the next four deductions you can claim...

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47 Things you never knew about allowances and deductions that can put money back in your pocket...

There's nothing better than getting money back from SARS. But do you know whether you can claim for:  
  • The cost of new laptops for your business?
  • 5% of building costs?
  • Stolen assets?
  • Gifts you give your clients to say thank you for their business?

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Four more deductions you claim
 
  1. Any business related debt that's become bad in the year. As long as the amount was previously included in your income. If you're a commission earning financial advisor and some of your commission was clawed back because of a lapsed insurance policy you sold, you can claim the clawback as a deduction. 
     
  2. Any allowance for doubtful debts. The doubtful debt allowance is 25% of expected bad debt. The allowance is added back to your taxable income in the following year (Section 11(j) read with Section 23(m)(ii)
     
  3. Income continuation or protection insurance premiums you have incurred during the year. As long as any benefit you receive under the policy is included in your income (Section 11(a) read with 23(m)(iii)(aa) and (bb)). For example, you may have taken out a policy that covers you against the loss of income as a result of illness, injury, disability or unemployment. The premiums are tax-deductible, as long as you include any benefit received from the policy in your taxable income if you claim.
     
  4. Home office expenditure (Section 23(m)(iv)
So make sure you take advantage of these seven deductions so you can stop paying more money to SARS than you have to. But be careful, if you deduct the wrong expenses or claim too many incorrect expenses, SARS will refund you incorrectly and you can face a criminal record.

Until next time
 
Natalie Cousens
Managing Editor: Practical Tax Loose Leaf Service

P.S: In Chapter B04: Businesses – Allowances and Deductions in the Practical Tax Loose Leaf we'll show you how you can easily identify which expenses you can and can't deduct so you stay off SARS' radar and have more money in the bank. If you don't have a copy yet, get yours here. 
 
 
 


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