A business expense is tax-deductible in South Africa if it was actually incurred, in the production of income, for the purposes of your trade, and it's not capital in nature. That covers most everyday running costs: rent, salaries, accounting fees, advertising, insurance, bank charges, repairs and business travel. Private expenses, capital purchases (claimed instead through wear-and-tear allowances), fines and SARS penalties are not deductible.
The basic test SARS applies
Section 11(a) of the Income Tax Act allows a deduction for expenditure that is:
Actually incurred. You owe it or have paid it during the year. A provision for a future cost doesn't count.
In the production of income. It's connected to earning your business income.
Not of a capital nature. Buying an asset that will last for years is capital. Running costs are not.
Laid out for the purposes of trade. Section 23 blocks private and domestic expenses, and any expense that isn't for trade.
If an expense passes all four tests and you have the paperwork to prove it, it's generally deductible.
Common deductible expenses
These are usually deductible for a trading business:
Rent for business premises
Salaries and wages, including your own salary if you're paid by your company, plus the employer's UIF and SDL
Accounting, bookkeeping and legal fees for the business
Advertising and marketing, including website and social media costs
Insurance on business assets and liability cover
Bank charges on business accounts
Telephone, internet and software subscriptions
Repairs and maintenance to business assets (restoring an asset, not improving it)
Business travel, supported by a logbook for vehicle travel
Interest on money borrowed for the business
Bad debts that you've written off and that were included in your income earlier
Stationery, cleaning and small consumables
Training and staff development
Assets: wear-and-tear instead of an immediate deduction
You can't deduct the full cost of a laptop, vehicle or machine in one go as a running expense. Instead, you claim a wear-and-tear allowance over the asset's useful life.
Small business corporations get faster write-offs: 100% in the first year for manufacturing assets, and 50% / 30% / 20% over three years for other assets. See our guide to small business corporation tax to check whether your company qualifies.
Expenses that are NOT deductible
Private and domestic expenses, such as family groceries, personal holidays, school fees or your home's running costs
Capital expenditure, such as buying property, vehicles or equipment (claim wear-and-tear instead, where allowed)
Fines and penalties, including traffic fines and SARS penalties and interest
Income tax itself
Provisions for future expenses that haven't been incurred yet
Donations, unless you have a valid section 18A receipt. Even then, the deduction is limited to 10% of taxable income. See are donations tax-deductible?
Mixed business and personal costs
Some costs are partly business and partly private: your car, your cellphone or an office at home. You can only deduct the business portion, and you need to be able to show how you worked it out.
Vehicles: keep a logbook of business kilometres.
Cellphones and internet: apportion based on reasonable business use.
Home office: SARS only allows a home-office deduction if the room is regularly and exclusively used for your trade and specifically equipped for it. Salaried employees must also perform more than 50% of their duties there. Rent, rates, electricity, cleaning and repairs are apportioned by the office's share of the home's floor area. For employees and office holders subject to section 23(m), bond interest is no longer deductible as a home-office expense for years of assessment beginning on or after 1 March 2022.
The easiest way to avoid arguments with SARS is to keep business and personal spending completely separate. Read why mixing business and personal money causes problems, and how to fix it.
Entertainment: income tax vs VAT
Business entertainment, such as a client lunch, can be deductible for income tax if it's genuinely connected to earning income. But you can't claim the VAT on it. Input VAT on entertainment is specifically denied. See denied input VAT for the full list.
Keep the proof
A deduction is only as good as the paperwork behind it. Keep invoices, receipts, contracts, bank statements and logbooks. SARS generally requires you to keep them for five years from the date you submit the return. Read how long to keep financial records.
Frequently asked questions
What makes a business expense tax-deductible? It must be actually incurred, in the production of income, for the purposes of your trade, and not capital in nature. Private expenses don't qualify.
Can I deduct the full cost of a new laptop? Not as a running expense. You claim a wear-and-tear allowance over its useful life. Small business corporations can write off non-manufacturing assets over three years (50% / 30% / 20%).
Are SARS penalties and interest deductible? No. Fines, penalties and SARS interest are not deductible.
Can I claim my home office? Only if the room is used regularly and exclusively for your trade and is specifically equipped for it. Salaried employees must also do more than half their work there. Bond interest can't be claimed.
Are client entertainment costs deductible? For income tax, they can be if they're genuinely for the business. But the VAT on entertainment can't be claimed back.