Expenses for employment
Employees may deduct some limited expenses from their job income. Such costs include business-related travel, vehicle, and entertainment expenses, with the amount that an employee can deduct being limited to the amount of the applicable allowance provided by their employer. For allowable assets utilized in the course of employment, a capital depreciation deduction is also possible. Legal fees related to job income are also deductible.
Employees who make the majority of their income through commissions may deduct their home office expenses, subject to certain conditions.
Allowances (subject to specified limits) issued to an employee by an employer to pay business expenses are taxable in South Africa, but only to the extent that they are not spend for business purposes or exceed the maximum deduction limit. Allowances for exclusively domestic or private expenditures, such as living expenses, are taxable.
Deductions for personal expenses
Charitable contributions
Donations to select designated public benefit organizations are deductible up to 10% of taxable income.
Medical expenses
Contributions to medical schemes for taxpayers and their dependents (subject to specific maximum restrictions) convert to a monetary tax rebate. This rebate can be used to the individual’s tax liability (see the Other tax credits and incentives section for more information). Persons over the age of 65 and those with disabilities have a greater conversion rate.
Contributions in excess of the credit amount, as well as any additional medical expenses, are converted to medical tax rebates at a predetermined rate. Persons over the age of 65 and those with disabilities are subject to a higher conversion rate and are not subject to a further excess threshold that applies to those under the age of 65 who do not have a disability.
Income insurance policy
Premiums paid on a loss of income insurance coverage due to death, disability, serious illness, or unemployment are not deductible. A similar exemption, on the other hand, results in none of the proceeds being taxable.
Pension funds
Contributions to a pension, provident, or retirement annuity fund are tax deductible (subject to specific maximum restrictions) if the funds are registered in South Africa.
Standard deductions
There are no other standard income deductions for natural persons. Other deductions available to people earning compensation income are restricted (see Business deductions below, for more information).
Deductions for business
If the taxpayer is running a business as a person or in partnership, they can deduct business expenses or losses in the same way that corporations can.
When the deductions and allowances allowed by the Income Tax Act exceed the income, an assessed loss results, which can be carried forward and set off against future income. Assessed losses incurred by a person in the highest tax band as a result of so-called’secondary trades’ (such as sports, arts, dealing in collectibles, hobby farming, and property renting) are ring-fenced in specific conditions.
Losses
Assessed losses (deductible expenses exceeding income) can be carried over to the following tax year and taken against taxable income in that year, providing the taxpayer trades in that year.
Taxpayers who receive employment income and are subject to income tax at the maximum marginal rate of 45% may have their losses from carrying on a secondary trade ring-fenced to that specific secondary trade if certain conditions are met.
