What can I deduct as business expenses for tax?

Tax-deductible business expenses are any expense incurred in the production of income or in the running of the business.

For example, stock bought for resale is considered a business expense or stationery bought for the office is also considered a business expense. You must keep a record of these business expenses.

In South Africa, whether you’re registered as a company or a sole proprietor, you can claim business expenses from business income to decrease your tax liability. Freelancers who work from home can also claim valid expenses.

If you run a business as a sole trader:

a) Day-to-day business expenses

These are general day-to-day office or business expenses, including items like stationery, petrol, and internet.

These expenses should all fall into one of the following categories:

●       material and equipment costs

●       employee costs and administration costs

●       office rental costs

●       office supplies

●       phone and internet costs

●       travel and transport, including business vehicle running costs

●       uniforms and PPE

●       wholesale purchase costs for inventory

●       financial charges (such as bank fees)

●       electricity, water and other utilities

●       security costs

●       cleaning costs

●       legal fees

●       insurance fees

●       marketing, advertising and promotional expenses.

Other expenses that should be included are:

●       The cost of staff training that directly relates to their role at the company can be claimed as a business expense.

●       Entertainment costs for clients can deducted i.e. drinks, meals or live entertainment – you must be able to prove that these costs where in the production of income.

●       Business startup costs – this is costs before you started trading that you had to incur to start the business.

b) Capital expenses

These are large expenses that don’t crop up on a daily or monthly basis. Usually, these long-term expenses are budgeted for well in advance. Examples include:

●       equipment and machinery

●       business vehicles

●       renovation costs

●       hardware, such as computers

●       signage

You can claim capital allowances for these expenses using the approved write off percentage.

If you are a taxpayer that earns commission

SARS allows commission earners to deduct all commission-related expenses against their commission income. This includes expenses such as telephone usage, petrol, accommodation, wear and tear, and entertainment.

You’ll need to prove that these expenses were directly related to your commission work. SARS has been known to flag these claims due to previous abuse of the system, especially for more vague claims like entertainment.

Claiming home office expenses

If you work from home, there are home office expenses you can claim for. These include items like data or internet expenses, electricity usage, rent, rates and cleaning costs. The claimable amount is based on how much of your home is taken up by your office space.

To work out what you can claim, you must work out what percentage of your home’s floor space is taken up by your dedicated workspace. It needs to be a specific room and it can’t be an area in your house like a dining room table. You can only claim for that percentage of your expenses because the rest is for personal use.

If you’re a remote worker who uses a coworking space like The Workspace, those office fees are still claimable as a business expense. This applies to freelancers and remote workers who are employed full time by a company. You will need a letter from your employer stating that you work from home or remotely to be able to claim home office expenses.

Documents you need to support your claims:

Regardless of your business structure, tracking your expenses regularly is key to managing your finances effectively, maintaining positive cash flow and ensuring accurate record-keeping.

Expense	Supporting documents
Office Rental	Monthly invoices or rental agreement
Office supplies	Receipts or invoices
Medical costs	Medical aid tax certificate, medical invoices
Depreciation on business asset	Original invoice, calculation of wear and tear
Travel	Mileage logbook, vehicle purchase invoice (if applicable, fuel, maintenance, licence and insurance invoices, accommodation invoices
Rideshare costs	Email receipt
Bank charges	Bank statements
Entertainment	Schedule with client names and purpose of entertainment, restaurant or venue invoice
Telephone	Monthly invoices or statements
Home office	Calculation of percentage of expenses claimable – invoices for expenses (electricity, water, rates, rental invoices)

For some of these expenses, it might be necessary to show the ratio between business and personal use. For example, if you use your personal phone for work, you’ll need to show what usage is business-related versus what usage is personal.

It’s a complex area of accounting and we’ll understand if you have questions. Just email or call and we can help you work out exactly what is, and isn’t a deductible expense.