The eight actions that legitimately reduce a South African company's tax bill before year-end are: confirm Small Business Corporation status, bring forward genuinely needed asset purchases and bring them into use, make retirement fund contributions, incur contractual bonuses, write off irrecoverable bad debts, review the salary and dividend split, claim the Employment Tax Incentive you are entitled to, and check your assessed loss position.
Every one has a deadline, and most of them close on the last day of your financial year. There is also one piece of common advice that costs more than it saves, and it is at the end.
First: confirm your rate
Before optimising deductions, confirm you are on the right regime. This is worth more than everything else on the list combined.
Small Business Corporation status taxes the first R99,000 at 0%, then 7%, 21% and 27% — a saving that builds to roughly R91,030 a year against the flat 27% rate.
The test that disqualifies most companies: no shareholder may hold shares in another company, subject to limited exceptions. A dormant company a shareholder registered years ago and forgot can disqualify your trading company entirely.
Check CIPC records for every shareholder. This takes twenty minutes and is the highest-value tax review a small company can do. See what is the company tax rate in South Africa.
Turnover Tax is a separate consideration for businesses under R2.3 million, and the switch must be made before the start of a tax year — so it is a decision for next year, not this one.
The eight actions
1. Bring forward asset purchases you genuinely need
Deadline: the asset must be brought into use before year-end, not merely ordered or paid for.
A qualifying Small Business Corporation writes off manufacturing assets 100% in year one and other qualifying assets over three years on a 50/30/20 basis. A non-SBC claims wear and tear over the SARS write-off period — three years for computers, five for general machinery.
Worked example, SBC. R400,000 of qualifying manufacturing plant brought into use before year-end.
Deduction in year one: R400,000
Tax saved at 27%: R108,000
The qualifier that matters: genuinely need. See the warning at the end.
2. Make retirement fund contributions
Deadline: before your personal year-end, 28 February.
Contributions are deductible at 27.5% of the greater of remuneration or taxable income, capped at R430,000 for 2026/27 — up from R350,000, the first increase since 2016.
This is the most efficient deduction available to most owners, because the money stays yours rather than being spent.
Note: the deduction is against remuneration or taxable income, so an owner taking only dividends has limited capacity. See salary or dividends.
Excess contributions carry forward rather than being lost.
3. Incur contractual bonuses
Deadline: the obligation must be incurred before year-end.
A bonus that is contractually owed at year-end is deductible in that year, even if paid afterwards. A bonus you intend to pay is a provision, and provisions are not deductible.
The distinction is the documentation. A board resolution or written commitment creating an unconditional obligation before year-end makes it incurred. An intention does not.
Remember the PAYE. The bonus is taxable in the employee's hands when paid, and it will produce a large PAYE deduction in that month. See how to calculate PAYE.
4. Write off genuinely irrecoverable bad debts
Deadline: written off in the books before year-end.
Where a debt was previously included in income and is genuinely irrecoverable, it is deductible.
What SARS asks for: evidence that recovery was pursued — letters of demand, collection attempts, correspondence. A debt written off with no recovery effort is routinely disallowed.
Do this properly rather than opportunistically. Review the debtors ledger, identify what is genuinely gone, document the recovery steps, and write it off. See how to get customers to pay you on time.
5. Review the salary and dividend split
Deadline: salary must run through payroll monthly, so this is a decision for the year ahead as much as the year ending.
Salary is deductible in the company; dividends are not. The combined cost of dividends is 41.6% for a standard company, so salary is cheaper while your personal marginal rate is below that — up to the 41% bracket at R887,001.
Where the company is an SBC, the combined dividend cost falls well below 41.6% and the answer changes. Model both.
You cannot backdate salary. Deciding in February to have paid yourself for the preceding eleven months creates late EMP201s, penalties and interest.
6. Claim the Employment Tax Incentive you are owed
Deadline: claimed monthly on the EMP201, but often recoverable retrospectively.
Up to R1,500 per qualifying employee per month in the first 12 months, and R750 in the second. Employees aged 18 to 29, earning R2,500 to under R7,500 a month.
Four qualifying employees is R72,000 a year — and the most common reason it goes unclaimed is that a setting in the payroll software was never switched on.
Check whether you can claim retrospectively if you have been employing qualifying young staff without claiming. See the Employment Tax Incentive explained.
7. Check your assessed loss position
Deadline: before the second provisional payment.
A brought-forward assessed loss can only offset the higher of 80% of taxable income or R1 million. Above R1.25 million of taxable income, the restriction bites and the company pays tax despite having losses.
Why this belongs on a tax-reduction list: knowing it changes what else is worth doing. A company that expected losses to cover the year, and finds they do not, has a real reason to bring forward an asset purchase or a retirement contribution. See assessed losses and the 80% rule.
8. Claim everything you are actually entitled to
Not a strategy so much as a discipline, and it is where most small companies leave the most money.
Routinely under-claimed:
The business portion of cellphone, internet and vehicle costs, where a documented apportionment exists
Home office, where the space genuinely qualifies
Bank charges buried in an interest line
Software subscriptions paid on a personal card
Staff subsistence on overnight travel, which is claimable and usually coded to entertainment
Section 12H learnership allowances where you have registered learners
See what business expenses are tax deductible.
Your year-end checklist
Work through this in the last month of your financial year.
| Action | Do it by |
|---|---|
| Confirm SBC qualification, including shareholder holdings | Now |
| Close management accounts to month 11 | Month 11 |
| Estimate taxable income including the 80% loss restriction | Month 11 |
| Bring needed assets into use | Year-end |
| Resolve and document contractual bonuses | Year-end |
| Review debtors and write off irrecoverable debts | Year-end |
| Make retirement contributions | 28 February |
| Stock count | Year-end |
| Reconcile the director's loan account | Year-end |
| Prepare the second provisional estimate from actuals | Year-end |
What does not work
Backdating anything. Invoices, resolutions, payroll. This is not tax planning.
Paying a "salary" you never ran through payroll. No PAYE, no payslip, no IRP5 means no deduction and a loan account instead.
Provisions and estimates. A provision for future repairs, future bonuses not yet owed, or a general doubtful debt provision is not deductible.
Buying an asset and leaving it in the box. The allowance starts when the asset is brought into use.
Personal expenses through the company. They fail the production-of-income test, and they build a debit loan account with deemed dividend consequences.
The advice that costs more than it saves
"Spend money before year-end to reduce your tax."
This is the most common bad advice in South African small business, and the arithmetic is simple.
Spend R100,000 on something you do not need, at a 27% tax rate:
Tax saved: R27,000
Cash gone: R100,000
You are R73,000 poorer
Spending only makes sense where you were going to buy the thing anyway and the timing is genuinely flexible. Bringing forward a machine you need in April to March is sound. Buying a machine you do not need is not tax planning, it is a 27% discount on a purchase you should not be making.
The same applies to bonuses, vehicles and stock. The test is always: would I buy this if there were no tax benefit? If the answer is no, the tax benefit does not change it.
Frequently asked questions
How can I legally reduce my company's tax in South Africa? Confirm Small Business Corporation status, bring forward genuinely needed asset purchases and bring them into use before year-end, make retirement fund contributions before 28 February, incur contractual bonuses, write off irrecoverable bad debts, optimise the salary and dividend split, claim the Employment Tax Incentive, and ensure you are claiming every deduction you are entitled to.
Should I buy equipment before year-end to reduce tax? Only if you were going to buy it anyway and the timing is flexible. Spending R100,000 you did not need to spend saves R27,000 of tax and leaves you R73,000 poorer. The asset must also be brought into use before year-end, not merely ordered or paid for.
Is a bonus deductible if I pay it after year-end? It is deductible in the year the obligation was incurred, so a bonus contractually owed at year-end is deductible even if paid afterwards. A bonus you merely intend to pay is a provision and is not deductible.
How much can I contribute to a retirement fund tax-free? 27.5% of the greater of remuneration or taxable income, capped at R430,000 a year for 2026/27, up from R350,000. Contributions must be made before your personal year-end of 28 February, and excess contributions carry forward rather than being lost.
Can I deduct bad debts before year-end? Yes, where the debt was previously included in income and is genuinely irrecoverable, and it is written off in the books before year-end. SARS expects evidence that recovery was pursued, so document the collection attempts.
What is the biggest tax saving available to a small company? Usually Small Business Corporation status, worth up to roughly R91,030 a year against the flat 27% rate. The test that disqualifies most companies is that no shareholder may hold shares in another company, including a dormant one registered years ago and forgotten.
Does spending money at year-end reduce my tax? It reduces taxable income, but you spend more than you save. At 27%, every R100 spent saves R27. It is only worthwhile where the expenditure was genuinely needed and the timing was flexible.
Plan in month eleven, not month thirteen
Almost everything on this list has a deadline of your financial year end. By the time the financial statements are being prepared, every one of those doors has closed.
Smartbook reviews the tax position with clients before year-end rather than after — SBC qualification, the assessed loss restriction, the salary and dividend split, and what is genuinely worth bringing forward.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Figures are for the 2026/27 tax year. This article covers legitimate timing and structuring decisions, not aggressive avoidance. Take advice on your own circumstances before acting.
Primary sources: SARS — Budget 2026 Frequently Asked Questions · SARS — Small Businesses Taxpayers · SARS — Income Tax · SARS — Employment Tax Incentive