Business Expenses – What Are Tax-Deductible Business Expenses?
Tax-deductible business expenses are any expenses that incur in the operation of a business. Therefore, any purchases made for the purpose of running a business count as a business expense.
For example, let’s say you brought in a total of R500 000.00 from your business for the tax year, and your business expenses were R100 000.00. That means your business taxable income is R400,000.00 which lowers your tax amount for that year.
Therefore, keeping record of purchases for your business is imperative.
What Counts As A Tax-Deductible Business Expense?
In South Africa, there are many pros and cons to running your own business. One of the biggest pros is being able to reduce your taxable income. Which of course reduces your tax bill by deducting legal business expenses.
Majority of the costs you incur that are directly related to operating your business can be tax-deductible.
But what types of expenses should you be keeping record of? Here’s a list of tax-deductible business expenses in South Africa:
- Office Supplies
- Telephone & Internet Costs
- Office Rent
- PPE And/Or Uniform
- Transport & Travel Costs
- Electricity, Water And Other Utilities
- Security Costs
- Financial Charges
- Insurance Costs
- Legal Fees
- Material And Equipment Costs
If you have a home office, you can also claim a percentage of your home expenses for work use.
- Rent Or Mortgage
- Rates And Taxes
- Repair Costs To The Premises
- Equipment And Machinery
- Business Vehicles
- Renovation Costs
- Hardware (Computers, Printers Etc)
- Education Expense – Investing in education for yourself or your employees can be deducted. Provided it is related to the operation of your business.
- Entertainment – Costs incurred while entertaining clients or arranging business meetings are tax deductible. This includes beverages, meals, live entertainment and venue hire. However, you need be able to prove that the expenses were incurred for business purposes.
Simplifying Business Expenses With Turnover Tax
If you are registered as a company or sole proprietor in South Africa, you can choose to pay either standard small business income tax rates or turnover tax. Turnover tax (as we have discussed before) is a tax rate aimed at small businesses with an annual turnover of less than R1 million.
Small business owners under turnover tax normally pay a lower tax rate than the standard tax system. Some may not have to pay any tax at all depending on their income for the year.
Stay On Top Of Your Business Financials
Regardless of your business structure, tracking your expenses regularly is key to managing your finances effectively and ensuring accurate record-keeping.