Small Business Tax Deductions in South Africa: What You Can Claim

Most small businesses in South Africa overpay tax, not because they cannot find deductions, but because they cannot prove the ones they took.

This covers what qualifies, what does not, and the evidence standard.

The test SARS applies

A deduction is generally allowed where the expense was:

Actually incurred in the year of assessment

In the production of income

Not of a capital nature

Not specifically prohibited

"In the production of income" is the one that catches people. The expense must connect to earning taxable income. A laptop used for client work qualifies. The same laptop bought for a family member does not, no matter whose card paid for it.

Commonly allowed deductions

Premises. Rent, rates, utilities, and cleaning for business premises.

Employment costs. Salaries and wages, your UIF and SDL contributions, and contributions to approved retirement funds for employees.

Professional fees. Accounting, bookkeeping, legal, and consulting fees incurred for the business.

Insurance. Business insurance, including public liability, and professional indemnity cover.

Marketing. Advertising, website costs, design, and printing.

Software and subscriptions. Accounting software, hosting, domain fees, and industry tools.

Bank and finance charges. Account fees, merchant fees on card payments, and interest on business loans.

Business travel. Fuel, tolls, accommodation and flights for business purposes. Where a vehicle is used for both, keep a logbook.

Repairs and maintenance. Restoring an asset to working order is deductible. Improving it beyond its original condition is capital.

Stationery and consumables.

Training that maintains or improves skills used in the business.

Bad debts actually written off, where the income was previously brought to account.

What SARS disallows

Private and domestic expenses. Groceries, personal clothing, family costs.

Capital expenditure. The cost of an asset itself is not deducted in one year. You claim wear and tear allowances over its useful life instead.

Fines and penalties. Traffic fines, late-payment penalties, and interest on overdue tax are not deductible.

Donations, unless made to an approved public benefit organisation with a valid section 18A receipt, and then subject to limits.

Input VAT on entertainment. Note the split: the expense may be deductible for income tax, but the VAT is not claimable.

Expenses without documentation. In practice this is the largest category of disallowed claims.

The home office question

If you work from home, a proportional claim may be available — but SARS applies strict conditions. Broadly, the space must be used regularly and exclusively for business, and be specifically equipped for it.

"Exclusively" is the sticking point. A dedicated room used only as an office has a case. The dining table does not, regardless of how many hours you work at it.

Where it qualifies, apportion by floor area: an 18 square metre office in a 150 square metre home is 12% of qualifying costs like rent, rates and electricity.

Vehicles

If a vehicle is used for both business and private travel, you must keep a logbook recording opening and closing odometer readings, and the date, destination, distance and purpose of each business trip.

Without a logbook, a business travel claim is very difficult to sustain. Reconstructing twelve months of trips from memory in an audit does not work.

Note separately that input VAT on the purchase of a passenger vehicle is generally not claimable.

The record-keeping standard

Keep for five years from the date of the last entry:

Invoices and receipts

Bank and credit card statements

Contracts and agreements

Vehicle logbooks

Payroll records

Asset registers

Electronic records are fine if they remain readable and retrievable for the full period.

A bank statement line is not enough on its own. "R4,200 — CARD PURCHASE" proves money left the account. It does not prove what was bought or why it was for the business. You need the underlying invoice.

Practical habits that protect the claims

Separate bank account for the business. Non-negotiable. It removes most apportionment arguments before they start.

Photograph receipts on the day. Thermal till slips fade to blank within months.

Note the business purpose on anything that could look personal — a restaurant bill should record who was there and why.

Reconcile monthly, not annually. You will remember what a payment was for in March; you will not in the following February.

Keep the logbook contemporaneously if you claim vehicle costs.

Do not claim what you cannot document. The interest and penalties on a disallowed claim exceed the tax you saved.

The deduction you can prove is worth more than the deduction you can argue for.

Making the records automatic

LEDGA lets you attach a photograph of a receipt to the expense at the moment you capture it, categorise it for tax, and keep the whole five-year record in one place with a searchable audit trail. When your accountant asks for support on a specific line, it is one click rather than an afternoon.

Try LEDGA free and start capturing expenses properly.