Most everyone is feeling the pinch of economic hardships and knowing where you can save by tax deductions can help lighten your financial load. Red Dot Now is here to help you understand how tax deductions can put some money back into your pocket.

In South Africa, we are taxed in our personal capacity (as employees) and as business owners (employers). Therefore, it is important to know what deductions you can have as a natural person or a business. Ask your Red Dot Now expert for guidance on the following deductions:

Charitable contributions

Donations to certain approved Public Benefit Organisations are allowed as deductions, up to a maximum of 10% of taxable income. The organization that you donate to has to be registered with SARS as a Public Benefit Organisation. You also have to submit a valid tax certificate of the contribution made.

Medical expenses

Medical scheme contributions for taxpayers and their dependants (subject to certain maximum limits) convert to a specified monetary tax rebate amount. This rebate can be set-off against the person’s tax liability. Ask your Red Dot Now financial advisor for more information about rates and rebates.

Income insurance policy

Premiums paid on a loss of income insurance policy as a result of death, disablement, severe illness, or unemployment are not allowed as a deduction. However, a corresponding exemption results in none of the proceeds being taxable.

Retirement annuity, provident and pension funds

Monthly contributions to pension, provident and retirement annuity funds are tax deductible. Subject to a yearly limit of R350 000, you may deduct up to 27.5% of your gross remuneration or taxable income (whichever is the higher).

Travel allowances

If you have to travel often for work and your employer pays a travel allowance, you can get some cash back from SARS. It is very important to keep a detailed logbook of your trips and the costs involved. SARS will not accept your claim otherwise.

Home Office Expenses

If you’re an employee but work mainly from home in a specifically dedicated space (like a study or office that isn’t used for any other purpose), you may be able to claim certain running costs associated with that space.

These include:

  • Rent
  • Rates
  • Interest on mortgage bond
  • Depreciation on office equipment
  • Electricity (A percentage of your household use)
  • Maintenance (repairs – not cosmetic improvements)

Depreciation on Personal Devices for Work Purposes 

The work environment has changed. These days many salaried employees use personal devices like cellphones and laptops for work purposes. If you’re using a device bought and maintained in your personal capacity for work, you may be able to claim the depreciation on the device as a tax deduction. This deduction requires a letter from your company stating that you have permission to use the device for work purposes, and that you are not receiving an allowance for that. Your Red Dot Now expert can advise you about the depreciation rates for different devices. 

Commission-related Expenses

Earning commission on top of a basic salary is coded as 3606 on your IRP5 form. If that income makes up more than 50% of your total income, SARS will allow you to deduct all the costs you incurred to make a living from commission income.

Business expenses if self-employed

Independent contractors, freelancers and sole proprietors are able to deduduct all expenses related to generating income. These include all office expenses, some vehicle expenses, employee salaries, accounting fees, membership fees to professional organisations etc. Be very thorough with keeping all invoices and records of these expenses. 

Tax-free investment accounts.

In March 2015, a tax -free investment product was introduced to encourage South Africans to save more money. Investors can invest up to R33,000 per year with a lifetime limit of R500,000, tax free. This allows you to take advantage of the medium- to long-term benefits of compounding, without paying any tax on interest, dividends or capital gains tax (CGT).

These are but a few ways that the tax load can be lightened and Red Dot Now is here to help you navigate the tax-maze with expert advice. 

Red Dot Now provides accounting, payroll and tax compliance services using the best of breed online technology.Should you want to discuss this or