When it comes to allowances and deductions, you're not allowed to deduct certain expenses from your income. If you overlook this and deduct expenses incorrectly, SARS will pick it up and punish you harshly. Read on to find out about the two expenses you can't deduct so you can comply with the Income Tax Act.
Two additional expenses you CAN'T deduct from your income
In this article, we gave you two expenses you're not allowed to deduct from your income. We're now going to give you two additional expenses you can't deduct from your income so you can fully comply with the Income Tax Act.
#1: Losses or expenses recoverable under a contract of insurance, guarantee, security or indemnity
The Practical Tax Loose Leaf Service says the Income Tax Act doesn't allow you to deduct any loss or expense if it's recoverable under a contract of insurance, guarantee, security or indemnity. For example, repairs to your vehicle that are recovered from insurance or from another party.
How much time do you spend looking for useful tax information? Do you need all the South African taxes analysed and explained in one easy location?
Now you can have all the information in one place: The Practical Tax Loose Leaf Service.
Over 500 pages compiled by our tax experts, comprising of:
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.
You will also get free access to the accountingandtaxclub.co.za
. Here you'll find questions and answers on any tax and accounting issues. You can also ask our experts a tax question
#2: Interest income you might have earned, known as notional interest
SARS doesn't allow the deduction of interest which you might make on any capital employed in a trade.
This means you can't claim the loss of interest you could have earned on funds you should have had in your business. This is also referred to as 'opportunity costs' in the accounting profession.
The bottom line: 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 all about the expenses you're not allowed to deduct from your income, comply with the Income Tax Act so you stay off SARS' radar.